Trump's Recent Tax Legislation Reveals Three Shocking Impacts on Your Child's Financial Tale
In a significant move towards securing a brighter future for children across the nation, the One Big Beautiful Bill (OBBB) has been signed into law. This comprehensive legislation addresses children's finances in three key areas: Trump Accounts, changes to 529 plans, and private school voucher tax breaks.
Firstly, the OBBB introduces a novel savings account called "Trump Accounts." Born between January 1, 2025, and December 31, 2028, children will receive a one-time $1,000 payment from the federal government, deposited into their Trump Accounts. These accounts, designed to help children start investing early, will accept contributions up to $5,000 annually from parents, relatives, and employers. The funds will remain inaccessible until the child turns 18, at which point they can withdraw or manage the investments independently.
The OBBB also expands the use of 529 plan funds to cover tuition and qualified expenses for elementary and secondary education. Starting in 2026, the annual limit for qualified 529 plan distributions will increase from $10,000 to $20,000, covering books, standardized test fees, online learning materials, certain tutoring fees, dual enrollment fees, and more. Post-secondary expenses, including workforce credentials programs and continuing education courses, are also included as qualified expenses under the new law.
In addition, the OBBB introduces a dollar-for-dollar tax credit for donations to private K-12 voucher programs. Donations must be made to Scholarship Granting Organisations (SGOs), which distribute scholarships to students for private school tuition, books, and homeschooling. The tax credit can reduce adjusted gross income by up to $1,700. However, some states may not implement this tax credit due to past voter rejections in state ballots, such as Colorado, Kentucky, and Nebraska.
Support for Trump Accounts has been expressed by several companies, including Dell, Uber, and Goldman Sachs. Dell has reportedly pledged a $1,000 match for its employees' children into Trump Accounts under the new tax provision.
For those considering alternative savings options, Coverdell ESAs are mentioned as an alternative to 529 plans, allowing more control over investment options for eligible individuals. For more information on Coverdell ESAs and private school voucher tax credits, check out Kiplinger's reports: "Coverdell ESAs vs. 529 Plans: Which Should You Choose?" and "Unprecedented' Private School Voucher Tax Credit in Trump's Megabill."
Together, these provisions aim to give children a better financial foundation through early investment accounts, broadened educational funding options, and incentives to support private school attendance. With these changes, the OBBB promises to make a significant impact on the financial futures of America's children.
- With the advent of Trump Accounts, children born between 2025 and 2028 can start investing early, as these accounts accept contributions from parents, relatives, and employers, and offer the opportunity for independent management of funds once the child turns 18.
- To broaden educational funding options, the OBBB has extended the use of 529 plan funds to cover tuition and qualified expenses for elementary and secondary education, with the annual limit increasing from $10,000 to $20,000 starting in 2026.
- As part of the OBBB, a dollar-for-dollar tax credit is introduced for donations to private K-12 voucher programs, providing incentives for businesses to support education and offering relief on adjusted gross income up to $1,700 for qualified donations.
