Included in H.R.1 are provisions that would create new tax-favored savings accounts, Trump Accounts, for children. It also includes creation of a pilot program under which there would be a one-time government contribution to Trump Accounts.

Generally, individuals could contribute up to $5,000/year (cash only) to Trump Accounts established for children younger than age eight. Distributions from Trump Accounts would be banned prior to the child’s attaining the age of 18, and limited to no more than half the value of the account between the account beneficiary’s age 18 and 25.

Qualified distributions (generally, education expenses, small business loans, amounts used for a first-time purchase of a principal residence) would be taxed as capital gains. Other distributions would be taxable as ordinary income and subject to a 10 percent penalty tax if the account’s beneficiary is under age 30. When the account beneficiary reaches age 31, the account would cease to be a Trump account and would be treated as distributed to the account beneficiary. There would be a six percent excise tax imposed on excess contributions.

The Trump Account pilot program would provide for a one-time credit of $1,000 to the Trump Account of each qualifying child of the taxpayer. A qualifying child is one born after December 31, 2024, and before January 1, 2029, who is a United States citizen at birth.

There are strict trustee and rollover rules included in the Trump Account provisions.

The Trump Account provisions take effect for tax years beginning after December 31, 2024.

Prospects: It appears as of now that the Trump Account provisions are among those agreed to by House, Senate, and Administration reconciliation bill writers ahead of the House vote on H.R.1. Thus, while it is possible that the Trump Account program will be dropped from the final bill (or changed during the Senate process), it seems likely at this point that the Trump Account program will be included, largely as written in H.R.1, in the final bill.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org