Trump’s Tax Plan for Capital Gains Taxes

The 2025 tax law signed by President Trump, known as the One Big Beautiful Bill Act, preserves the existing capital gains tax structure, keeping long-term rates at 0%, 15% and 20%. Although the law leaves capital gains brackets unchanged, it creates the “Trump Account,” a new savings vehicle for children. Enacted as part of a broader extension of the Tax Cuts and Jobs Act (TCJA), the legislation keeps most rules for taxing investment profits in place.

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Key Takeaways

• The 2025 Trump tax plan leaves capital gains tax rates unchanged, maintaining the 0%, 15% and 20% long-term brackets.
• Annual contributions to the newly created Trump Accounts 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 gains generated on the excess contribution.

Does the Trump Tax Plan Affect 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 are profits from selling assets held for more than one year. These gains are taxed at preferential rates of 0%, 15% or 20%, depending on the taxpayer’s income. The income thresholds for each rate are adjusted annually for inflation.

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 to reflect inflation

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 complicate tax-basis calculations and the choice of inflation index.

Check out our in-depth study to learn more about how the One Big Beautiful Bill Act (OBBBA) impacts Americans across the country.

The Trump Account and Capital Gains Taxes

A fairly major difference between the actual signed legislation and the rules that were initially floated concerns the taxation of withdrawals from the new Trump Account. This Trump Account, once referred to as the MAGA account, is a new type of 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 like 529 plans and Roth IRAs.

While it was once speculated that the Trump Account would have the unique feature of qualified withdrawals being taxed as long-term capital gains, it turns out the final rules stipulate they’ll instead be taxed at the higher ordinary income rates. This means when a beneficiary takes the money out of a Trump Account, it is subject to the same tax rules that apply to standard income. Had the capital gains rules been signed into law, that money would’ve been treated the same as profits from the sale of investments, such as stocks or mutual funds.

Under the law, individuals can 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.

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. These guidelines can help you determine whether a Trump Account may 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 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 and 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. After withdrawals are permitted, the account follows traditional IRA rules: distributions are generally taxed as ordinary income (not as capital gains) and a 10% early withdrawal penalty typically applies to distributions made before age 59 ½. Meanwhile, certain deposits like the $1,000 pilot program seed and employer-excluded contributions don’t count toward your cost basis and are fully taxable when withdrawn.

Excess contributions are penalized at 100% of the net income attributable to the excess amount. For example, say you contribute $6,000 when the limit is $5,000. If that extra $1,000 earns $50 in interest, the law imposes a penalty equal to the full $50 unless the excess contribution and earnings are properly withdrawn.

When money is withdrawn from a Trump Account, the tax owed depends partly on what kind of contributions were made. Some contributions, including government-funded deposits from the pilot program or nonprofit grants, do not count toward your cost basis (the amount you’ve already paid taxes on). That means excluded contributions are fully taxable when withdrawn, along with any investment gains those contributions generated.

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 broad benchmark 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, but broad indexes based on market capitalization, like the S&P 500, are allowed.

What This Can Mean for Your Financial Planning

The Trump Account offers a new way for families to save on behalf of children under age 18, combining after-tax contributions with tax-deferred growth until withdrawals become available. Once the beneficiary reaches the year they turn 18, the account transitions to follow traditional IRA rules, meaning future withdrawals are taxed as ordinary income rather than at capital gains rates.

Because the funds cannot be accessed before age 18 (and are subject to early-withdrawal penalties before age 59 ½) the account is structured for long-term accumulation rather than short-term spending needs.

For households focused on building lasting savings for a child, the Trump Account can complement, rather than replace, education or retirement-oriented accounts such as 529 plans or custodial IRAs.

Bottom Line 

The 2025 tax overhaul leaves long-term capital gains rates untouched while introducing the Trump Account, a savings option designed to promote early investing for minors. While an early version of the legislation sought to apply long-term capital gains tax rates to investment earnings within a Trump Account, the iteration that eventually became law taxes Trump Accounts as ordinary income.

Tax Planning Tips

• A financial advisor can help you plan around the tax liabilities that your investment portfolio creates. 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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