New MAGA Accounts Could Help Families Save for Children’s Futures

Many parents struggle to save money for their children’s futures while managing daily expenses. To address this, House Republicans have proposed a new initiative in their “One, Big, Beautiful Bill” that may ease some of the financial burdens on families with young children.

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Introducing MAGA Accounts

The acronym MAGA typically refers to President Donald Trump’s “Make America Great Again.” In this context, however, it represents “Money Account for Growth and Advancement.” This proposal introduces special trust accounts exclusively for children under eight years old.

If enacted, parents can open these accounts starting in 2026, allowing contributions up to $5,000 each year, adjusted for inflation, until the child turns 18. A trustee, like a bank, will manage the account, with the option to invest the funds in selected index funds for potentially higher growth.

Withdrawals from the account aren’t permitted until the child reaches 18, and at that point, they can only access up to half of the account’s balance. For example, if the account has $10,000 on their 18th birthday, they may withdraw a maximum of $5,000 before turning 25.

Tax Benefits and Conditions

All contributions made to the MAGA account would be tax-free for the child. If they use the funds for higher education, apprenticeships, small-business start-ups, or a first home, investment earnings could be taxed at favorable capital gains rates. Otherwise, ordinary income tax applies, plus a 10% penalty for withdrawals made before age 30.

The account will terminate once the child turns 31, at which point they must report any remaining investment earnings as income for tax purposes.

A Pilot Program for Newborns

To jump-start the MAGA account initiative, the bill proposes a pilot program for children born between 2025 and 2028. All eligible U.S. citizen children would receive a one-time $1,000 credit to their MAGA account.

For those without an existing MAGA account, the IRS will automatically create one. Parents also have the option to opt out if they choose not to participate in the program.

While the proposed MAGA accounts present an intriguing opportunity, the bill must first pass through the House and Senate, which could lead to changes in its final form. Families should stay informed, especially if they have children who qualify for this initiative.

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