No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Wednesday, October 29, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home IRS & Taxes

‘Trump Accounts’ Could Be Better. Here’s How.

by TheAdviserMagazine
5 months ago
in IRS & Taxes
Reading Time: 4 mins read
A A
‘Trump Accounts’ Could Be Better. Here’s How.
Share on FacebookShare on TwitterShare on LInkedIn


What Are Trump Accounts?

Trump Accounts are a part of the GOP’s “One, Big, Beautiful Bill” aiming to encourage saving for a child’s future by allowing parents and others to contribute up to a combined $5,000 yearly for the child to use after reaching age 18. Children born in 2025 through 2028 (as US citizens with Social Security numbers for both parents and the child) will be automatically enrolled and receive a one-time deposit of $1,000 from the federal government into their account.

The account grows taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.
-deferred until account owners make withdrawals. If account owners make withdrawals for a qualified expenditure (college tuition, small business loan/expense, first-time home purchase), the withdrawal, net of contributions, faces the long-term capital gains taxA capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. These taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment.
rate. Otherwise, withdrawals net of contributions face the individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S.
rate plus an additional 10 percent penalty.

Withdrawals are allowed from half of the account once the account owner turns 18 and from the full account once the account owner turns 25. When the account owner turns 31 the remaining balance is treated as withdrawn and taxed accordingly.

What Is Wrong with Trump Accounts?

Trump Accounts add another layer to an already overcomplicated savings account system in the United States. The tax code provides for at least 11 tax-advantaged savings vehicles, each with different rules, limitations, and regulations. The addition of the Trump Accounts would further complicate savings for taxpayers who would have to keep track of yet another account. Additionally, the Treasury Department and IRS, which are already bogged down with administering the existing plethora of savings accounts, would be forced to administer yet another account.

In an income tax neutral between saving and consumption, income used for saving is only taxed once: either when it is first deposited, or when it is withdrawn. Roth-style accounts tax income when it’s deposited but exempt withdrawals once taxpayers reach retirement age. Traditional IRAs and 401(k)s allow deductions for contributions but tax withdrawals at ordinary income tax rates.

Some existing savings accounts have double exemptions. Health savings accounts, or HSAs, allow deductions for contributions and do not tax withdrawals. Because of the double tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the Internal Revenue Service (IRS), preventing them from having to pay income tax.
, HSAs are more generous to saving than a neutral system would be. It’s worth noting that the reconciliation bill expands HSAs by increasing contribution limits and adding more types of qualified expenditures.

Contributions to Trump Accounts would not be deductible, and qualifying withdrawals would be eligible for the reduced long-term capital gains tax rate. Accordingly, Trump Accounts would provide less generous treatment than either a traditional or a Roth account. Trump Accounts would also provide less generous treatment than a 529 savings plan, which provides a full exemption for withdrawals used for qualifying expenses. However, by offering tax deferral, Trump Accounts would have a tax advantage over a generic brokerage account.

Only three expenditures would qualify for the long-term capital gains tax rate: college tuition or credentialing expenses, small business expenditures, and first-time home purchases. If a Trump Account owner used the money for any other reason, a higher tax rate would apply.

Proponents of Trump Accounts say they will promote saving and long-term wealth. However, the account owners would need to withdraw the full balance of the account by age 31 to avoid the money being taxed as income. This requirement is counterintuitive to encouraging truly long-term saving and wealth building.

Trump Accounts Are Most Similar to HSAs

What Can Be Done?

Adding another boutique savings account to the pile is a step towards complexity, not opportunity.

If the federal government really wanted to make saving more accessible for taxpayers, it would swap the proposal for Trump Accounts to replace the complicated mess of savings accounts currently available with universal savings accounts.

Universal savings accounts would simplify saving into one single tax-neutral account for taxpayers. Doing so would simplify saving for taxpayers and remove much of the current burden of rulemaking and administration from the Treasury and IRS.

Other countries that have implemented universal savings accounts have done so with remarkable success. In Canada and the United Kingdom, more than half the adult population uses a universal savings account and keeps more money in it than other retirement accounts. For low-income earners, balances in their savings account tend to exceed their income, which points to strong financial security.

Universal savings accounts should be implemented for the sake of taxpayers instead of another overly complicated, restrictive, and limited savings vehicle like Trump Accounts.

Stay informed on the tax policies impacting you.

Subscribe to get insights from our trusted experts delivered straight to your inbox.

Subscribe

Share this article

Twitter
LinkedIn
Facebook
Email



Source link

Tags: AccountsHeresTrump
ShareTweetShare
Previous Post

How the IRA Provisions (and Scores) Have Changed

Next Post

GrailPay Raises $6.7M Seed to Build Risk Infrastructure for the $86T ACH Payment Market – AlleyWatch

Related Posts

edit post
Impact of tariffs on tax and trade in 2025

Impact of tariffs on tax and trade in 2025

by TheAdviserMagazine
October 29, 2025
0

Strategies for tax and global trade professionals to manage tariffs. Highlights The Trump administration's tariff strategy has created economic turbulence,...

edit post
October 7 – October 23, 2025

October 7 – October 23, 2025

by TheAdviserMagazine
October 28, 2025
0

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for October 7, 2025 –...

edit post
How to Close 32% More Sales & Build a Firm Full of Your Ideal Clients

How to Close 32% More Sales & Build a Firm Full of Your Ideal Clients

by TheAdviserMagazine
October 28, 2025
0

If you’ve ever felt overworked, underpaid, or frustrated by clients who don’t value your expertise, this presentation is for you....

edit post
How to Avoid W-2 Taxes Using Real Estate |

How to Avoid W-2 Taxes Using Real Estate |

by TheAdviserMagazine
October 28, 2025
0

If you earn W-2 income, you already know how much of your paycheck disappears before you even touch it. Most...

edit post
Sound Tax Policy Can Withstand Creative Destruction

Sound Tax Policy Can Withstand Creative Destruction

by TheAdviserMagazine
October 27, 2025
0

This year’s Nobel Prize in Economics was awarded to economists Joel Mokyr, Philippe Aghion, and Peter Howitt for their work...

edit post
Penalty Abatement for Small Partnerships | Canopy

Penalty Abatement for Small Partnerships | Canopy

by TheAdviserMagazine
October 27, 2025
0

How Accounting Firms are Using AI to Save Time (and Sanity) If you run an accounting firm, you probably have...

Next Post
edit post
GrailPay Raises .7M Seed to Build Risk Infrastructure for the T ACH Payment Market – AlleyWatch

GrailPay Raises $6.7M Seed to Build Risk Infrastructure for the $86T ACH Payment Market – AlleyWatch

edit post
Vance joins Trump in bashing Powell, says Fed committing ‘monetary malpractice’ by not cutting rates

Vance joins Trump in bashing Powell, says Fed committing 'monetary malpractice' by not cutting rates

  • Trending
  • Comments
  • Latest
edit post
77-year-old popular furniture retailer closes store locations

77-year-old popular furniture retailer closes store locations

October 18, 2025
edit post
Pennsylvania House of Representatives Rejects Update to Child Custody Laws

Pennsylvania House of Representatives Rejects Update to Child Custody Laws

October 7, 2025
edit post
What to Do When a Loved One Dies in North Carolina

What to Do When a Loved One Dies in North Carolina

October 8, 2025
edit post
Another Violent Outburst – Democrats Inciting Civil Unrest

Another Violent Outburst – Democrats Inciting Civil Unrest

October 24, 2025
edit post
Probate vs. Non-Probate Assets: What’s the Difference?

Probate vs. Non-Probate Assets: What’s the Difference?

October 17, 2025
edit post
California Attorney Pleads Guilty For Role In 2M Ponzi Scheme

California Attorney Pleads Guilty For Role In $912M Ponzi Scheme

October 15, 2025
edit post
Boot Barn outlines .2B sales target and 1,200-store expansion amid raised TAM to B (NYSE:BOOT)

Boot Barn outlines $2.2B sales target and 1,200-store expansion amid raised TAM to $58B (NYSE:BOOT)

0
edit post
Private Equity’s New Exit Playbook

Private Equity’s New Exit Playbook

0
edit post
How Food Industry Lobbyists Keep the Food-Stamp Gravy Train Going

How Food Industry Lobbyists Keep the Food-Stamp Gravy Train Going

0
edit post
ASIC Confirms Stablecoins and Tokenised Assets Fall Under Financial Law

ASIC Confirms Stablecoins and Tokenised Assets Fall Under Financial Law

0
edit post
What Are the Signs of a Fake Rich Person?

What Are the Signs of a Fake Rich Person?

0
edit post
The CEOs of Apple, Airbnb, and PepsiCo agree on one thing: life as a business leader is incredibly lonely

The CEOs of Apple, Airbnb, and PepsiCo agree on one thing: life as a business leader is incredibly lonely

0
edit post
Boot Barn outlines .2B sales target and 1,200-store expansion amid raised TAM to B (NYSE:BOOT)

Boot Barn outlines $2.2B sales target and 1,200-store expansion amid raised TAM to $58B (NYSE:BOOT)

October 29, 2025
edit post
The CEOs of Apple, Airbnb, and PepsiCo agree on one thing: life as a business leader is incredibly lonely

The CEOs of Apple, Airbnb, and PepsiCo agree on one thing: life as a business leader is incredibly lonely

October 29, 2025
edit post
How to keep your AI use from violating industry rules

How to keep your AI use from violating industry rules

October 29, 2025
edit post
Japan’s Biggest Card Firm Joins The Network

Japan’s Biggest Card Firm Joins The Network

October 29, 2025
edit post
What Are the Signs of a Fake Rich Person?

What Are the Signs of a Fake Rich Person?

October 29, 2025
edit post
Why Nearly Half of Gen Z Now Buys Secondhand Monthly to Beat Inflation

Why Nearly Half of Gen Z Now Buys Secondhand Monthly to Beat Inflation

October 29, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • Boot Barn outlines $2.2B sales target and 1,200-store expansion amid raised TAM to $58B (NYSE:BOOT)
  • The CEOs of Apple, Airbnb, and PepsiCo agree on one thing: life as a business leader is incredibly lonely
  • How to keep your AI use from violating industry rules
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.