Trump’s Tax Plan for Capital Gains Taxes

The 2025 tax legislation signed into law by President Trump, commonly referred to as the One Big Beautiful Bill Act, preserves the existing capital gains tax framework. Long-term capital gains rates remain set at 0%, 15% and 20%, with no changes to the underlying brackets. While the law leaves capital gains taxation intact, it introduces the “Trump Account,” a new tax-advantaged savings vehicle designed for children. Enacted as part of a broader extension of provisions from the Tax Cuts and Jobs Act, the legislation maintains continuity in how investment gains are taxed while adding targeted savings incentives.

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Does the Trump Tax Plan Affect Capital Gains Tax Rates?

Trump’s tax law leaves existing capital gains tax rates and income tax brackets unchanged. Capital gains remain a key consideration for investors, especially those with taxable brokerage accounts, real estate holdings or long-term investment portfolios.

Under current rules, profits from selling assets held for more than one year (long-term capital gains) are taxed at preferential rates of 0%, 15% or 20%, depending on a taxpayer’s income. The income thresholds for these brackets are adjusted annually for inflation.

2026 Long-Term Capital Gains Tax Rates

The One Big Beautiful Bill Act left capital gains tax rates unchanged.

However, Project 2025, a policy blueprint developed by the Heritage Foundation, proposed several potential reforms to capital gains taxation, including:

• Lowering the top long-term capital gains rate from 20% to 15%
• Indexing capital gains to inflation, which would allow investors to adjust their cost basis to reflect changes in purchasing power over time

These proposals were considered during the policy development process, but were not included in the final legislation. Even so, they offer insight into the types of capital gains changes that may resurface in future policy discussions. If enacted, such reforms would likely favor higher-income investors while adding complexity to cost-basis calculations and raising questions about which inflation measure should apply.

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

One notable difference between the final legislation and earlier proposals involves how withdrawals from the new Trump Account are taxed. The Trump Account, previously referred to in draft discussions as the MAGA account, is a new savings vehicle for children intended to promote long-term saving through tax-advantaged growth. ¹ Structurally, it shares similarities with existing accounts such as 529 plans and Roth IRAs.

Early policy discussions indicated that qualified withdrawals from a Trump Account could be taxed at long-term capital gains rates. Under the final provisions of the One Big Beautiful Bill Act, however, distributions are taxed as ordinary income. This means withdrawals are treated the same as wages or other taxable income, rather than benefiting from the lower rates typically applied to investment gains.

The law sets annual contribution limits at $5,000 per beneficiary, with contributions made using after-tax dollars. Earnings within the account grow on a tax-deferred basis. Contributions are not allowed during the first 12 months after enactment, and the $5,000 annual 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 introduces a new savings vehicle for families contributing on behalf of children under age 18.

Contributions are made with after-tax dollars, and earnings grow on a tax-deferred basis until withdrawals become available. In the year the beneficiary turns 18, the account begins to operate similarly to a traditional IRA, with distributions taxed as ordinary income rather than at long-term capital gains rates.

Because funds are generally unavailable before age 18 and early withdrawals before age 59 ½ can trigger penalties, the account is designed for long-term savings rather than near-term expenses.

For families aiming to build lasting financial reserves for a child, a Trump Account may serve as a complement to other savings options, such as 529 plans or custodial IRAs, rather than a substitute for them.

Bottom Line 

More broadly, the 2025 tax overhaul preserved existing long-term capital gains rates while introducing the Trump Account as a new tool intended to encourage early investing for minors. Although earlier legislative drafts contemplated taxing Trump Account earnings at preferential capital gains rates, the final law applies ordinary income tax treatment to distributions.

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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