MILLIONS of Americans are set to receive a one-time payment worth $1,000 within the next year under legislation aimed at providing a much-needed financial boost to families.
The bonus money, stemming from a “transformative” initiative from President Donald Trump and Senator Ted Cruz, is not limited to individuals who make a certain income.
Qualifying families will receive a one-time payment worth $1,000 within the next year[/caption]
The money will be distributed to eligible Americans under President Donald Trump’s One Big Beautiful Bill[/caption]
Trump signed his nearly 1,000-page budget reconciliation plan, the One Big Beautiful Bill, into law on July 4.
Under the new legislation, the government is handing out $1,000 in federal money to American babies born during Trump’s second term, between 2025 and 2028.
Roughly 3.6 million babies are born in the country each year, meaning that the government’s annual bill for the program could reach several billions of dollars.
The cash is automatically invested in “Trump Accounts,” opened by a newborn’s parents or the US Department of Treasury, which are intended to help families provide their kids with a strong financial start.
The goal of the accounts is to set up American newborns for future success by supporting their future educational pursuits, encouraging homeownership, and boosting their overall financial wellbeing.
Financial experts have said that the accounts are structured similar to hybrid individual retirement accounts.
To be eligible for the account and so-called “seed money,” newborns must be US citizens and have a Social Security number, and their parents must prove their work eligibility by providing a Social Security number.
There are no income requirements to receive the one-time payment and open an account, which is expected to become available in July 2026.
DOWN TO THE DETAILS
Trump’s savings proposal was originally named “Money Accounts for Growth and Advancement,” or MAGA, but was recently renamed “Trump Account.”
Parents, family members, and employers can contribute up to $5,000 annually in additional money to the accounts.
Contributions made before a newborn turns 18 are not eligible for tax deductions, although up to $2,500 a year given by employers will not count as taxable income.
A stipulation of the Trump Accounts is that the cash must be invested in low-cost stock mutual funds or exchange-traded funds tracking a US stock index, such as the S&P 500.
The idea is that investing early will allow the funds time to grow and ride out market swings.
Republican Senator Ted Cruz of Texas, who thought up the idea, said the Trump Accounts would “unleash the power of compound growth and create new generations of capitalists” in a news release.
Trump’s main policy points
- Implementing tax cuts, including no tax on tips.
- Protecting Social Security and Medicare – Trump said, “Incomes will skyrocket and the middle class will prosper like never before.”
- Protecting borders – He pledged to end the “border nightmare.” That means two things on day one – “Drill baby Drill,” as he said, and close the borders.
- Finishing building the wall.
- Keeping our “sons and daughters safe.”
- Replenishing the military and building a military “dome” – Trump insisted he could stop wars with just a phone call and said no military would be able to penetrate the USA if he came into office.
- Ending the war in Ukraine and imposing tariffs on Iran.
- Vowing to “beat” China.
- Working to decrease prices and ease inflation.
- Bringing down the cost of energy.
- Making cities “safe, clean and beautiful” again.
- Making it possible for Americans to buy gas-run cars by ending the electric vehicle mandate on the first day of his presidency.
“There are many Americans who don’t own stocks or bonds, are not invested in the market, and may not feel particularly invested in the American free enterprise system. This will give everyone a stake,” Cruz told Semafor.
In general, the money cannot be taken out of the account prior to the year that the child turns 18.
Once the beneficiary hits that age, the Trump Account will be treated as a traditional IRA and subject to the usual contribution limits and other requirements, Ian Berger, analyst at an IRA advisory firm told The New York Times.
Money contributed to traditional IRAs are tax deductible for those who qualify based on their income and other requirements, per IRS rules.
Withdrawals made from traditional IRAs before a beneficiary reaches age 59.5 are generally taxed as ordinary income, plus a 10% penalty.
The penalty may be dismissed in certain circumstances, such as using the cash to fund higher education, the birth of a child, or making a down payment on a first home.
Additional guidance is expected from the IRS to clarify this, Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals, told The New York Times.
Trump Accounts could create a powerful IRA because the deposited cash could remain invested and grow for decades, a head start considering that many Americans do not begin saving for retirement until their early 30s.
Aside from creating Trump Accounts, the One Big Beautiful Bill means that certain taxpayers could face higher monthly payments.
It also means that Americans could see up to $12,000 extra on their Social Security paycheck yearly – there’s just two requirements.
There are no income requirements to receive the $1,000 payment in a Trump Account[/caption]
