One of the provisions of the budget bill passed by the House creates savings accounts for newborns, branded as "Trump Accounts," that would have a one-time deposit of $1,000 from the federal government.

Washington

The House of Representatives has passed a budget bill that contains several new provisions, including the creation of government-backed savings accounts for newborns. Branded as "Trump Accounts," these savings accounts will receive a one-time federal deposit of $1,000 for each eligible newborn. Parents can contribute up to $5,000 annually into these accounts, with earnings growing tax-deferred. Qualified withdrawals are taxed at the long-term capital gains rate.

The accounts, originally referred to as "MAGA Accounts," are designed as an incentive for families to have more children, addressing concerns about declining birth rates. Only newborns are eligible for the initial $1,000 deposit, but accounts can be opened for any child under the age of eight. If parents do not set up an account for their newborn, the federal government will create one on their behalf.

There are restrictions on how the funds can be used. According to available information, withdrawals from Trump Accounts can be used for post-secondary education or purchasing a first home. Experts have noted that, compared to existing options like 529 education savings accounts, the advantages of Trump Accounts are limited, with the primary benefit being the initial federal contribution.

The bill passed the House by a narrow margin after late negotiations secured the needed votes. It now proceeds to the Senate, where it is expected to face further debate and scrutiny.



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