A new proposal emerging from Capitol Hill could soon reshape the way families save for their children’s future. The Republican tax bill, now under discussion by the House Ways and Means Committee, introduces a government-seeded savings account for children called the “Money Account for Growth and Advancement” or the MAGA account.
Here’s what you need to know about this potentially impactful initiative:
What is the MAGA Account?
The MAGA account is a tax-preferred savings account aimed at helping American children build financial security from birth. If the proposal becomes law, the U.S. Treasury Department would automatically open and fund a $1,000 account for each child born between 2025 and 2028 roughly aligning with the proposed second term of President Trump.
Think of it as a hybrid between a 401(k) and a 529 college savings plan, but with some important limitations and distinct rules.
How Would It Work?
- Initial Government Funding: $1,000 deposited at birth for eligible children.
- Annual Contributions: Families could contribution up to $5,000 per year into the account.
- Account Management: A parent or guardian would act as a trustee and could direct investments into mutual funds and other eligible vehicles.
- Goal: Encourage long-term investing and financial growth for future education, homeownership, or other major milestones.
What Are the Tax Rules?
While the account offers tax-deferred growth, it isn’t as generous as traditional retirement or college savings accounts:
- Qualified Withdrawals: Funds used for covered expenses like higher education or a first-time home purchase would be subject to capital gains tax, but not income tax.
- Non-Qualified Withdrawals: These would be fully taxable as income and also face a 10% penalty if the beneficiary is under age 30.
- Age Restrictions: No withdrawals before age 18. Any remaining balance at age 31 would be distributed to the beneficiary and taxed accordingly.
- Anti-Fraud Measures: A $1,000 penalty would apply to any misuse or fraud committed by the account trustee.
Will It Become Law?
The MAGA account proposal is expected to pass through committee and be incorporated into what Republicans are calling “one big beautiful bill.” It still faces the full legislative process in both the House and Senate, but has vocal support from Senators.
The Joint Committee on Taxation estimates the program would cost the federal government a hefty amount.
What Else Is in the Tax Bill for Parents?
In addition to the MAGA accounts, the bill proposes:
- Increasing the Child Tax Credit from $2,000 to $2,500 per child starting in 2025.
- Raising the Standard Deduction, which could result in meaningful tax savings.
What This Means for You
While the MAGA account remains just a proposal for now, it reflects a growing trend: giving American families more tools to invest in their children’s futures. Whether you’re a parent, future parent, or grandparent, understanding how these accounts might work can help you plan smarter.
At BrilTax Advisors, we keep a close eye on tax law developments that may impact your family’s finances. If you have questions about this or any other tax proposal, we’re here to help you navigate what’s ahead.
Need help with tax planning for your family’s future?
Contact BrilTax today to schedule a consultation with one of our trusted advisors.
