The One, Big Beautiful Tax Bill includes a provision that would give each of your children born between 2025 and 2028 $1,000. That’s right. You heard it here first.
President Trump wants to give your kids a G-Note. In order to qualify, each parent must have a valid Social Security number.
And nothing needs to be done. The Treasury Department will set them up automatically for each newborn inside the period.
Parents or relatives can then put up to $5,000 per year into the accounts in after-tax money for the child’s education. The money would be invested in broad based US Equity Funds.
Withdrawals could begin at age 18, and could be used for Higher Education, Job Training, Small Business Expenses, or a First Time Home Purchase. As long as it’s used for one of these purposes, it would be taxed at Long-Term Capital Gains Rates.
If not used for those purposes, it would be taxed at Regular Income Tax Rates. At age 25, the entire remaining balance could be withdrawn under the same tax consequences.
This provision has been included in both the House and Senate Versions of the new tax bill.
Proponents of the bill say that it’s a great way to get parents to save for their child’s education. Opponents say that it doesn’t have the features of a 529 College Savings plan.
529 savers get a break on their State Income Tax Returns. Also, the annual savings limits are higher for the 529 plans.
We’ll see if this gets signed into law. I’ll continue to write about it as the story progresses.
Let me leave you with this…
Entrepreneurs have a better vehicle that saves even more money in taxes than either of those two plans put together. It’s called their small businesses.
What would be wrong with putting your kids who are old enough to work on the payroll? When I was a kid growing up in my mother’s business I was always doing something.
Whether it was answering the phones or cleaning the bathrooms, I did whatever I could to help the family business. My daughter was the same way as a kid.
The difference was that I paid her. I set up a Roth IRA for her when she was old enough to help out and paid her $5,000 annually for her work.
I then put that $5,000 into a Roth IRA for her education expenses. What just happened?
I just received a $5,000 payroll deduction at the S Corp Level that I used to fund my daughter’s college education. In other words it was basically free other than the payroll taxes on the W-2.
I filed her income tax return paying no Federal Income Tax given the standard deduction and a small State Income Tax. The money then grew tax free in the IRA.
When she was 18 years old, through smart investment decisions, I was able to pay for her entire college education with the money in the IRA. And there was no early withdrawal penalty for qualified education expenses.
Other than some payroll taxes and a small State Income Tax, my daughter’s ridiculously expensive business degree from DePaul University was free.
Why am I the only person writing about this? The simple answer is simple.
Commissions.
Certified Financial Planners and other money managers can’t get a commission on IRA Accounts. They can on 529 Plans, hence their constant recommendations of these even though 529’s only help on the less expensive State Income Tax Return.
Think about it. And now that you can put even more money into IRA’s it’s even a better deal.
It’s the American Dream. Almost free college educations for the children of smart entrepreneurs.
We excel at tax planning.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
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