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$1,000 Baby Bonus: What to Know About the Proposed 'Trump Accounts' for Newborns

Photo-illustration of a baby bottle with money wrapped around it

Money; Getty Images

Last week, House members narrowly passed President Donald Trump’s “big, beautiful” tax bill, which includes a new savings account for children that comes with a one-time baby bonus.

The proposed “Trump Accounts” — originally dubbed “MAGA Accounts” or “Money Accounts for Growth and Advancement” — are designed as long-term investment accounts for newborns. Initially funded by a $1,000 contribution from the federal government, these accounts would be tax-preferred and tied up until the account holder turns 18.

The goal, according to proponents, is to give young Americans a financial head start and encourage wealth-building from birth. Here’s everything you need to know about the proposal, from who’s eligible to how the money could be used.

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What is a Trump Account?

The Trump Account is a tax-deferred investment account that the Department of the Treasury would automatically open for every eligible child born between Jan. 1, 2025, and Jan. 1, 2029. Each account would receive a one-time $1,000 deposit from the federal government. Friends and family would also be allowed to contribute up to $5,000 per year to the account.

Funds in the account would grow tax-deferred, meaning gains wouldn't be taxed annually. However, qualified withdrawals — for expenses such as college, a first home or starting a business — would be taxed at the long-term capital gains rate. Non-qualified withdrawals would be taxed as regular income.

Trump accounts would function less like savings accounts and more like brokerage accounts with funds invested and potentially subject to market fluctuations. With that in mind, it's similar to a custodial brokerage account, where a parent or guardian manages investments on behalf of a minor.

Another tax-advantaged account commonly used for higher education is the 529 plan. Unlike 529 plans — which allow tax-free withdrawals for qualified educational expenses — Trump Accounts would still incur taxes on earnings, even for qualified uses, although at the long-term capital gains rate.

Who's eligible for a Trump Account?

If enacted, children born between Jan. 1, 2025, and Jan. 1, 2029, would be automatically enrolled in the program by the Department of the Treasury. To qualify, the child must be a U.S. citizen, and both parents must have a valid Social Security number.

What can the funds be used for?

Trump Accounts would allow tax-preferred withdrawals for qualified expenses, including educational expenses, buying a home and starting a business.

When can the money be accessed?

The funds would be tied up until the account holder turns 18. At that point, the account holder could withdraw up to 50% of the funds for qualified expenses without facing regular income tax.

At age 25, the account holder could withdraw up to 100% of the balance for the same aforementioned qualifications. After age 30, the funds could be withdrawn for any reason.

How long could contributions be made?

Contributions could be made until the account holder turns 18, up to the annual contribution limit of $5,000.

Are Trump Accounts available yet?

Not yet. While the House of Representatives passed a version of the “big, beautiful” bill last week (which includes the provision for Trump Accounts), the legislation must still pass the Senate, where it could face further revisions or pushback.

Republicans are hoping for minimal changes in the Senate as they aim to deliver the bill to Trump by July 4. However, Sen. Ron Johnson of Wisconsin told CNN on Sunday that he believes there are "enough" Republicans to "stop the process until the president gets serious about spending reduction and reducing the deficit." The bill is projected to add $2.3 trillion to the federal deficit over the next decade.

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