The 2025 tax law signed by President Trump—formally known as the One Big Beautiful Bill Act—preserves the existing capital gains tax structure, keeping long-term rates at 0%, 15% and 20%. While it does not alter capital gains brackets, the law introduces the “Trump Account,” a new savings vehicle for children that applies capital gains treatment to certain withdrawals. Passed as part of a broader extension of the Tax Cuts and Jobs Act (TCJA), the legislation leaves the taxation of investment profits largely intact.
- The 2025 Trump tax plan leaves capital gains tax rates unchanged, maintaining the 0%, 15% and 20% long-term brackets.
- The legislation introduces the Trump Account, a new savings vehicle for minors that treats qualified withdrawals as long-term capital gains.
- Annual contributions are capped at $5,000 for beneficiaries under age 18, with inflation adjustments beginning in 2028.
- Withdrawals are restricted until the beneficiary turns 18, and excess contributions may trigger a penalty equal to 100% of the income earned on the excess.
How the Trump Tax Plan Affects Capital Gains Tax Rates
Trump’s tax law does not include any changes to existing capital gains tax rates or income tax brackets. Capital gains taxes are a central consideration for many investors, particularly those managing taxable brokerage accounts, real estate or long-term investment portfolios.
Under current law, long-term capital gains—profits on assets held for more than one year—are taxed at preferential rates of 0%, 15% or 20%, depending on a taxpayer’s income. These thresholds are adjusted annually for inflation.
2025 Long-Term Capital Gains Tax Rates
| Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | 0 – $48,350 | 0 – $96,700 | $0 – $48,350 | $0 – $64,750 |
| 15% | $48,350 – $533,400 | $96,700 – $600,050 | $48,350 – $300,000 | $64,750 – $566,700 |
| 20% | $533,400+ | $600,050+ | $300,000+ | $566,700+ |
These rates remain unchanged under the One Big Beautiful Bill Act. However, Project 2025, a policy blueprint created by the conservative Heritage Foundation, has called for:
- Lowering the top long-term capital gains rate to 15% (from the current 20%)
- Indexing capital gains to inflation, allowing investors to adjust their cost basis upward to reflect inflation over time
While these ideas were discussed, they were not included in the final law. They do, however, offer insight into the types of changes the Trump administration could pursue. Such measures would be beneficial to higher-income investors. At the same time, they could introduce complexity around calculating tax basis and choosing the appropriate inflation index.
The Trump Account and Capital Gain Taxes
The only capital gains-related change included in the signed legislation concerns the taxation of Trump Account withdrawals. The Trump Account, previously referred to as the MAGA account, is a new savings account for children. It’s designed to encourage personal saving by offering tax-advantaged growth, similar in some ways to existing retirement or education savings accounts.
Under the law, individuals would be able to contribute up to $5,000 per year to a Trump Account. Contributions are made with after-tax dollars, and the account is allowed to grow tax-deferred over time. No contributions are allowed in the first 12 months after the law’s enactment. However, the $5,000 limit will be indexed for inflation starting in 2028.
What makes the Trump Account unique is that qualified withdrawals are taxed as long-term capital gains rather than ordinary income. The tax law specifies that Trump Account distributions will be included in the investor’s net capital gains for the year. This means when you take money out of a Trump Account, it is subject to the same capital gains tax rules that apply to profits from the sale of investments like stocks or mutual funds.
By aligning Trump Account withdrawals with capital gains tax treatment, the law could offer a more favorable outcome than taxing withdrawals as ordinary income. Long-term savers and those in lower capital gains tax brackets in particular may benefit.
Trump Account Contribution and Withdrawal Rules
While the Trump Account is a new concept, the final legislation outlines clear rules regarding who can contribute, how much can be added each year and how withdrawals will be handled. Understanding these guidelines is essential for determining whether a Trump Account could fit into your financial strategy.
Annual Contribution Limits
Under the law, contributions of up to $5,000 per year can be made to a Trump Account for beneficiaries under age 18. These contributions are made with after-tax dollars and are not deductible. The funds grow tax-deferred, and qualified withdrawals are taxed as capital gains rather than ordinary income.
Eligibility
The law does not impose income limits on eligibility. Trump Accounts are available to individuals under age 18 with a valid Social Security number, regardless of birth year. While children born between 2025 and 2028 may be eligible for a separate $1,000 pilot contribution, the account itself is not limited to that group. Funds are not restricted to specific purposes like education or retirement.
Penalties or Restrictions on Withdrawals
Withdrawals are prohibited until the calendar year in which the beneficiary turns 18, with exceptions for rollovers, death or excess contribution refunds. While early withdrawal penalties don’t apply in the traditional sense, distributions may be subject to capital gains tax treatment depending on the type of contribution. Excess contributions are penalized at 100% of net income attributable to the excess amount.
For example, if you contribute $6,000 in a year—$1,000 over the limit—and that $1,000 earns $50 in investment gains while it sits in the account. If that excess isn’t removed properly, the law imposes a penalty of $50—equal to 100% of the net income attributable to the $1,000 excess.
When money is withdrawn from a Trump Account, the tax owed depends partly on what kind of contributions were made. Some contributions—such as government-funded deposits from the pilot program or nonprofit grants—don’t count toward your cost basis (the amount you’ve already paid taxes on). That means when you take money out, those excluded contributions are fully taxable, along with any investment gains they generated.
Even so, the law still treats these withdrawals as capital gains, not ordinary income. So while more of the distribution may be taxable, it’s taxed at long-term capital gains rates (0%, 15%, or 20%), not at higher income tax rates.
Eligible Investments
Before the account beneficiary turns 18, Trump Accounts can only hold certain types of low-cost, diversified investments. Specifically, the law limits investments to mutual funds or exchange-traded funds (ETFs) that track a “qualified index,” such as the S&P 500 or another broad index composed primarily of U.S. equities.
These funds cannot use leverage, must have annual fees no higher than 0.1% of the account balance, and must meet any additional criteria set by the Treasury Department. Sector-specific or narrowly focused indexes are excluded, though indexes based on market capitalization are permitted.
What This Can Mean for Your Financial Planning
The Trump Account introduces a new long-term savings vehicle that may appeal to families aiming to build generational wealth. Its after-tax contributions and capital gains-style withdrawal treatment create a tax profile distinct from both Roth IRAs and 529 plans. However, contribution limits, age-based withdrawal rules and penalties for early access should be weighed against other options when building a strategy for a child or dependent.
For families considering the Trump Account, the structure may serve a different purpose than education or retirement accounts. It creates a flexible savings tool for minors with a long time horizon and a distinct set of rules.
Bottom Line
The latest tax law leaves the existing capital gains system in place while introducing a new account that applies those same rules in a different context. By pairing long-term investment tax treatment with a savings plan for children, the Trump account adds a new layer to how capital gains policy functions. While no structural changes were made to tax brackets or rates, the law reflects a continued emphasis on long-term investing and low-cost indexing, particularly for younger savers.
Tax Planning Tips
- A financial advisor can help your tax liability for investments. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to know how much your next tax refund or balance could be, SmartAsset’s tax return calculator can help you get an estimate.
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