US Babies To Get Nearly Rs 85,000 In 'Trump Accounts': What It Is

The US government proposed last week a wealth creation programme for American children born during President Donald Trump's second term in office. The draft law wants the funds to be added to a "money account for growth and advancement" or "MAGA accounts". 

But an amendment was submitted by the House Republicans on Wednesday to ditch the "MAGA" acronym. This means, $1,000 (Rs 85,529) will now get deposited into "Trump accounts," The New York Times reported.

Who will get $1,000?

Children in the US, born between January 1, 2025, and January 1, 2029, will receive the money. On their behalf, the amount will be invested in the financial markets. These children will be able to withdraw the amount once they grow up. This can be used for specific expenses such as buying a house or going to college.

According to CBS News, the child and the parents should have Social Security numbers to get themselves automatically enrolled into the scheme. These accounts will be set up and funded by the US Treasury.

Besides the child's parents, other third parties will also be allowed to contribute to the account. The amount for this is set at up to $5,000 a year.

The US government will be contributing $1,000 to the eligible children's accounts.

When to withdraw funds

Half of the money in "Trump accounts" can be withdrawn after the child turns 18 years old. 

The account holders will be allowed to utilise the full balance for approved purposes between the 25-30 age group. After 30, they can use this amount for any purpose.

But certain things left tax experts puzzled. People will only be allowed to contribute from their post-tax income. Apart from that, account gains will be taxed at the time of withdrawal. 

According to The New York Times, this appears to make it function like a "typical investment account" and not a "tax-advantaged account".

The gains will be taxed at the long-term capital gains tax rate. These withdrawals will be taxed as income if the funds from the "Trump account" are used for other purposes. The administration can also apply a 10% penalty if the money is misspent.