HUNTSVILLE, Ala. (WAFF) – One of the pieces of President Donald Trump’s Big Beautiful Bill could open the door for investment opportunities for your children. Senior financial adviser from The Welch Group, Jay McGowan, says there are a plethora of factors that will determine whether or not the accounts would benefit you and your kids.
In the current bill, the proposed accounts would begin in 2026 for U.S. citizens under the age of eight. McGowan says automatic $1,000 contributions will be placed in the accounts for children born between 2025 and 2028. Families can make annual contributions of up $5,000 after tax. The accounts are opened automatically once a child is claimed on your tax return.
“The big thing you want to pay attention to is what these accounts can be used for and what the tax consequences are,” McGowan said.
He says the account will allow your child to withdraw up to fifty percent of the account once they reach the age of 18, and at the age of 25 they can withdraw the entire balance. The account must be used by the age of 31, and only for qualified uses.
Those qualified expenses include “higher education, job training, small business expenses, and a first-time home purchase,” McGowan said.
The time and reason for the money being withdrawn will determine the type of taxes applied.
“If you don’t use it by age 31, and then you take the money out, the earnings are taxed as ordinary income, so not as favorable as, you know, tax-free or long-term capital gains,” McGowan says. “Now, if you use them according to the rules and take the money out for those qualified expenses, the gains are taxed as capital gains, which is a little bit different than a 529 College Savings Plan.”
With a 529 Plan, if you use the money for qualified education expenses, it’s not taxed at all. This is why he recommends examining all investment options for your child’s future, even if your child qualifies for a “Trump account.”
“Obviously, if your child is born between 2025 and 2028, take the free $1000, but then you really want to evaluate what you are saving your money for, above and beyond that” McGowan says. “Because there may be a better investment option out there to help you and your child reach your goals.”
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