The bill adds a new Part IX to the Internal Revenue Code creating Money Accounts for Growth and Advancement (MAGA accounts): tax‑exempt trusts established for individuals who are minors at account opening, limited to cash contributions, capped contributions, and restricted to low‑cost, index‑tracking equity investments. It defines age thresholds for contributions and distributions, taxes certain distributions as net capital gain, imposes excises for duplicate or excess contributions, and requires trustees to report to the IRS and beneficiaries.
Separately, the bill creates a MAGA Accounts Contribution Pilot that directs the Treasury to seed accounts for children born between 2025 and 2028 with a one‑time $1,000 credit (paid into MAGA accounts), lets the Secretary establish default trustees and accounts if none exist, and authorizes charities and governments to make contributions that do not count toward the annual cap. The package targets early‑life wealth building while tightly constraining investment choices and adding new reporting, withholding, and taxpayer‑data routing rules—important for trustees, asset managers, compliance teams, and Treasury operations.
At a Glance
What It Does
Establishes MAGA accounts: tax‑exempt trusts for individuals opened before age 8, accepts cash contributions starting Jan 1, 2026, with a $5,000 annual limit (CPI‑adjusted after 2026), and restricts holdings to regulated funds that track U.S. equity indexes without leverage and low fees. It prescribes age‑based distribution rules, taxes earnings used for qualified expenses as net capital gain, and imposes excise taxes and withholding for duplicates and excess contributions.
Who It Affects
Parents and guardians of minors, banks and trustees (who must serve as custodians), managers of index mutual funds and ETFs that meet the Secretary’s criteria, charities and governments participating in the contribution program, and the IRS/Treasury for reporting and account‑seeding operations.
Why It Matters
This creates a federal child savings vehicle blending private custodial accounts with a federal seeding pilot and donor routing rules, setting tax and compliance precedents for taxpayer‑facilitated, age‑targeted savings while concentrating assets in a narrow set of investment products—implications for fiscal cost, industry participants, privacy, and administrative load.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
The MAGA Act adds a new tax‑favored account type to the Internal Revenue Code. A MAGA account is a trust (or qualifying custodial account) created in the U.S. for the exclusive benefit of a named individual and designated at setup.
The bill requires an establishing adult to provide Social Security numbers for both grantor and beneficiary, and forces trustees to be banks or similarly approved custodians. Contributions can only be cash, cannot be made before Jan 1, 2026, and the beneficiary must be under 18 at time of contribution; the account itself must be opened before the beneficiary turns 8.
The bill tightly restricts investments: MAGA assets must be held in regulated investment companies that track a U.S. equity index (or equivalent diversified U.S. equity portfolio), cannot use leverage, and must minimize fees and expenses under standards the Secretary will set. Annual cash contributions are capped at $5,000 (subject to inflation adjustments beginning after 2026), but contributions from governments, from the Treasury‑administered pilot, and qualified rollovers do not count against that cap.Distribution rules are age‑tiered.
Earnings withdrawn for enumerated qualified purposes—higher education, post‑secondary credentials, certain small business expenses linked to borrower activity, and first‑time home purchases—are taxed as net capital gain. Other withdrawals are included in gross income, and beneficiaries under 30 face a 10% additional tax on nonqualified taxable distributions.
MAGA accounts terminate for tax purposes at age 31; duplicate accounts trigger termination, withholding, and an excise tax on income allocable to the account.On administration, trustees must report contributions, distributions, and investment‑in‑contract calculations to the IRS and beneficiaries. The bill also carves an exception into section 6103 to let Treasury bureaus receive return‑derived information needed to route donor contributions to many beneficiaries under the pilot or charity programs; that disclosure is limited to routing and identification information and forbids redisclosure by the Secretary.
The bill amends excise‑tax rules for excess contributions and adds penalties and clerical adjustments tied to the pilot credit.Finally, the MAGA Accounts Contribution Pilot directs Treasury to pay a one‑time $1,000 credit into a MAGA account for certain children (born 2025–2028) where the taxpayer claiming the credit lists required Social Security numbers on their return. If a beneficiary lacks a MAGA account by the qualifying date, Treasury must establish one and notify parents, allowing an opt‑out.
The Secretary also chooses default trustees using reliability, cost, customer‑service, and practical preference criteria.
The Five Things You Need to Know
The bill bars MAGA account contributions before January 1, 2026, requires accounts be opened while the beneficiary is under age 8, and caps annual cash contributions at $5,000 (CPI‑adjusted after 2026).
MAGA assets may only be invested in regulated investment companies that track U.S. equity indexes (or equivalent diversified U.S. equity portfolios), use no leverage, and ‘minimize fees and expenses’ as defined by the Secretary.
Earnings withdrawn for qualified education, post‑secondary credentialing, specified small‑business‑related expenses, or a first‑time home purchase are taxed as net capital gain; other distributions are ordinary taxable income and distributions includible in income for beneficiaries under 30 incur a 10% additional tax.
The Secretary will seed eligible newborns (born 2025–2028) with a one‑time $1,000 MAGA account credit, may establish default accounts and trustees when no private account exists, and requires Social Security numbers on returns to claim the credit.
Holding duplicate MAGA accounts is prohibited: a later MAGA account terminates as a MAGA account, its balance is treated as distributed, and an excise tax applies to the portion allocable to investment income, with trustee withholding required.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Short title and references
Names the measure the 'Money Accounts for Growth and Advancement Act' (MAGA Act) and establishes that amendments reference the Internal Revenue Code. This is the standard framing provision and sets the bill’s internal citation conventions.
Definition and structural rules for MAGA accounts
Creates the MAGA account as a new tax‑exempt vehicle. The provision sets the trust/custodial form, requires SSNs for grantor and beneficiary, makes the trustee a bank or approved person, mandates nonforfeitability, and imposes custodial and commingling rules. Practically, this forces market participants to supply account‑opening KYC data and meet trustee qualification tests the Secretary will validate.
Contribution rules and limits
Establishes a $5,000 annual cash contribution limit (with cost‑of‑living increases after 2026) and prohibits contributions before Jan 1, 2026. It excludes qualified rollovers and contributions from federal, state, local, tribal governments, and the pilot program from the cap. That carve‑out enables third‑party seeding and rollovers without eating into a family’s cash contribution allowance.
Distribution mechanics, qualified expenses, and rollovers
Sets three tax outcomes: (1) return of investment principal is non‑taxable; (2) income used for enumerated qualified expenses is includible as net capital gain; and (3) nonqualified distributions are taxable as ordinary income, with a 10% surtax for beneficiaries under 30. The text imports 529/72(e)(9) style rules to determine 'investment in contract' and allows direct trustee‑to‑trustee rollovers between MAGA accounts without counting toward annual limits.
Custodial treatment, reporting, and termination rules
Treats qualifying custodial accounts as trusts for MAGA purposes but requires trustee status for the custodian. Trustees must report contributions, distributions, and investment‑in‑contract amounts to the IRS and beneficiaries on a timetable the Secretary prescribes. Accounts cease to be MAGA accounts at age 31; duplicate later accounts are terminated with excise taxes and trustee withholding. These mechanics create significant operational and reporting obligations for financial institutions.
Program for contributions to predominantly unrelated children
Directs the Secretary to set up a program allowing 501(c) organizations and governments to make pooled contributions that are distributed equally among a defined class of beneficiaries (by geography, school district, etc.). That creates a federal channel for bulk philanthropic giving, but requires the Secretary to operationalize beneficiary selection and routing.
Tax treatment, excess contribution rules, data disclosure, penalties, and clerical fixes
Adds MAGA distributions that meet the statutory conditions into the definition of net capital gain (section 1(h)); treats MAGA accounts as subject to the excess‑contribution excise in section 4973 with a defined calculation; carves an exception into section 6103 to permit Treasury bureaus to receive routing and beneficiary identification information for the pilot/program; expands penalties and reporting failures to cover MAGA account reporting; and amends clerical provisions to treat missing SSNs for the pilot as mathematical/clerical errors. Combined, these changes create new compliance obligations and permit limited IRS information flows to support account seeding.
MAGA Accounts Contribution Pilot program
Creates a one‑time $1,000 refundable credit paid into a MAGA account for eligible individuals born between Jan 1, 2025 and Dec 31, 2028, where the taxpayer filing the return lists required SSNs. If no private MAGA account exists by the qualifying date, the Secretary must establish a default account, select a default trustee using reliability and cost criteria, notify parents, and permit opt‑outs. The pilot includes administrative safeguards like SSN requirements and trustee selection standards, but delegates major implementation detail to Treasury.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Children born 2025–2028 (and their families): eligible for a one‑time $1,000 seed paid into a MAGA account by Treasury, giving early, tax‑favored capital accumulation.
- Saving families prioritizing education, entrepreneurship, or first‑time home purchases: tax treatment favors use of earnings for defined qualified expenses and allows flexible qualified uses beyond college.
- Low‑cost passive fund providers and ETF issuers: the eligible investment definition channels assets toward index‑tracking mutual funds/ETFs that meet the Secretary’s low‑fee, no‑leverage criteria.
- Nonprofits and governments keen to target place‑based giving: the program in subsection (l) lets 501(c) donors and governments make pooled contributions to a geographic or school‑based class of beneficiaries, enabling scaled philanthropic interventions.
- Trustees and banks that win default appointments: Treasury’s authority to establish default accounts and pick trustees creates opportunities for institutions selected as default custodians and their service providers.
Who Bears the Cost
- Treasury/IRS and federal budget: foregone revenue from tax‑exempt earnings and the $1,000 pilot credits, plus implementation and ongoing matching/administrative expenses.
- Banks, trustees, and custodial platforms: new onboarding, reporting, SSN verification, compliance, and withholding functionality; operational costs to enforce investment and distribution rules.
- Active fund managers and higher‑fee product distributors: the eligible investment restriction reduces a large addressable market for active strategies in MAGA accounts.
- Account beneficiaries and families who take nonqualified distributions: subject to ordinary taxation and a 10% additional tax if the beneficiary is under 30, creating potential tax and cash‑flow penalties.
- IRS and Treasury bureaus handling donor routing: need to process sensitive beneficiary data under a narrow 6103 exception, adding program management and privacy oversight burdens.
Key Issues
The Core Tension
The central dilemma is whether to maximize early life asset building by creating a simple, low‑cost, federally enabled child savings vehicle—or to avoid concentration of federal power, privacy intrusions, and fiscal exposure by keeping programs decentralized and narrowly targeted. The bill trades broad access and administrative simplicity (via index‑only rules and a one‑time seed) for increased Treasury control, data sharing, and a heavy compliance burden on trustees—choices that will determine whether MAGA accounts scale as equitable wealth‑building tools or become complex, unevenly implemented programs.
The bill packs several implementation choices into Secretary discretion—what counts as 'minimizes fees and expenses,' which indices qualify as 'well‑established,' and exactly how Treasury routes donor funds to many beneficiaries. Those undefined administrative standards will determine whether MAGA accounts remain low‑cost, widely accessible vehicles or become compliance‑heavy, litigation‑prone products.
The required SSNs, the 6103 routing exception, and default account creation give Treasury significant operational authority to identify and seed beneficiaries, but also raise privacy and data‑security questions that the statute does not resolve (e.g., retention, matching, and audit access to routing data).
Operational complexity is another knot. Trustees must compute 'investment in the contract' using rules modeled on 529/72(e)(9); determine allocable income vs. principal for tax reporting; enforce contribution caps while exempting government and pilot credits; detect duplicate accounts and perform withholding for excise tax; and file IRS reports on a schedule the Secretary prescribes.
Those tasks require new systems and coordination across tax‑administration and private custodians. The pilot’s cohort limits (children born 2025–2028) and the Secretary’s power to create default accounts could produce uneven outcomes across states and populations depending on how trustee selection and beneficiary identification are implemented.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.