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, largely 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

Capital gains tax rates remain unchanged under the One Big Beautiful Bill Act. However, Project 2025, a policy blueprint developed by the Heritage Foundation, outlined several potential changes to capital gains taxation, including:

• Reducing the top long-term capital gains rate to 15%, from the current 20%
• Indexing capital gains to inflation, allowing investors to adjust cost basis to account for price changes over time

Although these proposals were discussed during the policy development process, they were not incorporated into the final legislation.

Still, they provide insight into the types of capital gains reforms that could be considered in future policy debates. Such changes would primarily benefit higher-income investors, while also introducing additional complexity around cost-basis calculations and the selection of appropriate inflation measures.

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 suggested that qualified withdrawals from a Trump Account might be taxed at long-term capital gains rates. The final rules adopted under the One Big Beautiful Bill Act instead provide that withdrawals are taxed as ordinary income. As a result, distributions are subject to the same tax treatment as wages or other taxable income, rather than the generally lower rates applied to investment gains.

Under the law, annual contributions to a Trump Account are capped at $5,000 per beneficiary and must be made with after-tax dollars. Account earnings are allowed to grow on a tax-deferred basis. Contributions are not permitted during the first 12 months following enactment, and the $5,000 contribution limit will be indexed for inflation beginning 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 establishes a new savings option 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 are permitted. In the year the beneficiary turns 18, the account transitions to treatment similar to a traditional IRA, with future distributions taxed as ordinary income rather than at long-term capital gains rates.

Because funds are generally inaccessible before age 18 and subject to early-withdrawal penalties prior to age 59 ½, the account structure is geared toward long-term accumulation rather than short-term spending needs.

For families focused on building durable savings for a child, the Trump Account may function as a supplement to existing education or retirement-related vehicles, such as 529 plans or custodial IRAs, rather than a direct replacement.

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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