“Republicans’ “big, beautiful bill” includes a gift to millions of families: $1,000 in an investment account for every eligible newborn.
The new savings vehicles, akin to Individual Retirement Accounts, are designated for children who are U.S. citizens born from 2025 through 2028. In addition to the one-time government contribution, parents and others can chip in as much as $5,000 a year to the accounts, which beneficiaries can access at 18, with some constraints.
The seed money is a boon for recipients and will grow tax-deferred. Financial planners say parents and guardians might do better putting their money into existing investment vehicles such as a 529 plan, a savings plan designed to cover college expenses. But 529s are limited to education, while backers say the new accounts can help their recipients beyond college.
Republican lawmakers call the accounts “Trump accounts,” though the Senate’s plan to officially name them after the president did not make it to the final version of the legislation, which was signed Friday. They deliver on an idea that both Democrats and Republicans have floated for years: to invest money for all children at birth.
Withdrawals from a 529 are not subject to state or federal taxes as long as the funds go toward qualified education expenses – a feature the new investment accounts don’t share. And in the new accounts, parents’ deposits don’t qualify for a tax deduction, notes Greg Leiserson, a senior fellow at the Tax Law Center at New York University. “You have this very slight or minimal-to-nonexistent tax benefit,” he said. “What is the point here?”
Financial adviser Amy Spalding of Chapel Hill, North Carolina, said she will continue to steer her clients to 529s. “It’s better from a tax standpoint,” Spalding said. “And there are more investment options. And then there’s a higher contribution limit.” (For 2025, a single person can deposit as much as $19,000 a year into a beneficiary’s 529, while married couples can contribute as much $38,000.)
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withdrawals will be taxed at typical income rates, not at the capital gains rate of a taxable brokerage account. “For most people, this is going to be worse than what they could do in a taxable account,” he said.
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The law requires the new investment accounts to track a U.S. stock index
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“If you’re saying, ‘Okay, I’m going to start school in the fall’ – if the market falls over the summer, the planning you were doing about how you were going to pay for college is totally messed up, because the money you thought would be there, isn’t.”
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account holders cannot touch the funds until they turn 18. After that, the rules are the same as those of an individual retirement account – withdrawals are taxed like income, plus an additional 10 percent tax penalty on any withdrawals before age 59½ except for certain qualified uses.
Those uses include paying for college, supporting themselves if they become disabled, or recovering from domestic abuse or a natural disaster. Beneficiaries also can withdraw as much as $10,000 to buy their first home, and up to $5,000 when they have a new baby themselves.
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Even one of the Trump accounts’ biggest proponents in Congress, Rep. Blake Moore (R-Utah), said in an interview that for many parents, the new account design offers more benefits for retirement than for college expenses.”
“Asked whether the U.S. would be flexible with any countries about on the July 9 deadline, Trump said, “Not really.”
“They’ll start to pay on Aug. 1,” he added. “The money will start to come into the United States on Aug. 1, OK, in pretty much all cases.”
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Tariffs are paid by importers — which can pass on part or all of the costs to consumers — and not necessarily by entities in the goods’ country of origin.”
“the bill does not include a provision to eliminate federal income taxes on Social Security benefits.
“There is no provision in the budget bill that directly ‘eliminates’ or even reduces taxes on Social Security benefits,” Howard Gleckman, senior fellow at the nonpartisan Tax Policy Center, told the Washington Post.
Trump’s bill offers a tax deduction of $6,000 to seniors making up to $75,000 individually, or $150,000 on a joint return. The deduction is lowered for incomes above that level and axed for seniors with individual incomes of more than $175,000, or $250,000 jointly. However, the new deduction for seniors is set to expire within a couple of years. The median income for seniors in 2022 was about $30,000.”
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“Before the megabill’s passing, 64 percent of seniors receiving Social Security income paid no tax on their Social Security due to exemptions and deductions, according to an estimate by Trump’s Council of Economic Advisers. Under Trump’s megabill, 88 percent won’t be paying.”
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the rise is due to the bill’s increase in “the standard deduction for seniors, which, as a result, reduces the number of seniors who will pay taxes on their Social Security benefits.”
…the new legislation will provide limited benefits for lower-income seniors because they already pay less in taxes.”
“As Republicans began to consider their bill in January, Trump promised to “love and cherish” Medicaid. But he ultimately embraced the cuts as necessary to get the bill passed and lobbied reluctant GOP representatives and senators to go along.”
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“Other entitlements like Medicare and Social Security, which both serve elderly people, were deemed too politically risky to touch. Trump has been even more adamant about not reducing benefits in Medicare and Social Security, a cornerstone of his first campaign in 2016, than he was about Medicaid.”
“That unwillingness to significantly budge on his array of tariffs has bogged down trade negotiations and hindered the administration from crafting substantial trade deals. As the U.S. has set out to negotiate deals with more than 60 trading partners, world leaders have grown increasingly frustrated with what they say are unbalanced demands from the U.S.
Other trading partners, including the European Union, have bristled at the terms of the UK framework and said they would not agree to a similar deal. That arrangement left a 10 percent so-called baseline tariff in place, while laying out a path to slash sector-specific tariffs.
The bloc isn’t alone, and Trump’s numerous demands and “do-it-or-else” approach have made it challenging for countries to corral the domestic political support they’ll need in order to sell any deal at home.”
“Trump’s all-sticks-and-no-carrot approach to trade talks is making it difficult for even friendly foreign governments to reach an agreement they fear could be political suicide back home — no matter how much the White House threatens their economies.”
Trump’s big beautiful bill hits Medicaid hard, which provides health insurance for low-income people. The bill adds onerous paperwork requirements that many people will fail to complete. Republicans represent the cuts as getting able-bodied young men back to work, but for Medicaid to save money, it has to no longer pay medical bills, which do not primarily come from able-bodied young men.