• Source:JND
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The US government has introduced an investment plan based on children that will distribute American babies born during Donald Trump's second term a $1,000 deposit, around Rs 85,529, in "Trump Accounts." This program, initially known as "MAGA Accounts" (Money Account for Growth and Advancement), has seen a fundamental modification by House Republicans, renamed but with the same essence of increasing long-term fiscal stability for generations to come.

What Are 'Trump Accounts'?

According to The New York Times, the US Treasury will set up and seed these accounts for each child born from January 1, 2025, to January 1, 2029. The 1,000 USD seed capital will be invested in the financial markets on behalf of this child.

The plan is to offer financial assistance for significant life events like:
• Higher education costs
• Housing
• Entrepreneurship or other future expenses

Who Are Eligible?

For eligibility, the newborn and their parents should have valid Social Security numbers. The families will be enrolled in the programme automatically, which makes the process smooth. Besides the government contribution, third parties such as parents, relatives, or guardians may contribute up to 5,000 USD per year into the account. These payments, however, should be from post-tax income.

When Can the Money Be Used?

The "Trump Accounts" money will be partially available when the child is 18 years old. Here's the withdrawal schedule:
• At 18: Withdraw 50 per cent for approved purposes
• 25 to 30 years: Withdraw 100 per cent for approved purposes
• After 30: Any reason may be used

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Tax Implications & Concerns

While the scheme appears to be hopeful, professionals have raised a couple of red flags:
• The accounts are not tax-favored as in traditional education or retirement savings plans.
• All capital gains will be taxed at the long-term capital gains rate when distributed.
• If used for a non-approved objective, the distribution will be taxed as ordinary income and may incur a 10 per cent penalty.

This means the accounts function more like standard investment accounts rather than tax-sheltered options like Roth IRAs or 529 plans.

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