Families considering contributions to a child’s Trump Account now have additional guidance on how those contributions may be treated for federal gift tax purposes. Revenue Procedure 2026-25 provides a safe harbor that may allow qualifying contributions to receive the annual gift tax exclusion without requiring the donor to file a federal gift tax return.
Trump Account Basics
A Trump Account is a type of traditional individual retirement account established for an eligible child. The child owns the account, although a parent, guardian or other authorized person generally manages it while the child is a minor.
An account generally may be established for a child who:
- Is under age 18 at the end of the year in which the election is made;
- Has a valid Social Security number; and
- Has not previously had a Trump Account election filed on their behalf.
Eligible U.S. citizen children born from January 1, 2025, through December 31, 2028, may also receive a one-time $1,000 contribution from the U.S. Treasury after the required election is completed.
Contributions and Investments
Parents, grandparents, employers and others may contribute to a Trump Account. Most private and employer contributions are subject to a combined annual limit of $5,000 per child. Employer contributions are generally limited to $2,500 and count toward the overall limit.
The federal government’s $1,000 pilot contribution, certain qualifying government or charitable contributions, and eligible rollovers generally do not count toward the $5,000 limit.
A child does not need earned income to receive contributions, but individuals cannot deduct their contributions for income tax purposes.
While the child is a minor, account funds generally must be invested in qualifying mutual funds or exchange-traded funds that track an index composed primarily of U.S. companies.
Access to the Account
Withdrawals are generally prohibited through December 31 of the year before the beneficiary turns 18. As a result, the funds ordinarily cannot be used for school, medical or household expenses during the child’s minority.
Limited exceptions may apply for certain rollovers, the correction of excess contributions or a distribution following the beneficiary’s death.
Beginning January 1 of the year the beneficiary turns 18, the account generally becomes subject to traditional IRA rules. The beneficiary may take distributions, but withdrawals may be taxable and could be subject to a 10% early-distribution tax unless an exception applies, such as for certain higher-education or first-time homebuyer expenses.
The Gift Tax Safe Harbor
Gift tax concerns arose because the beneficiary generally cannot access the account before age 18. This raised questions about whether contributions would be treated as future-interest gifts, which ordinarily do not qualify for the annual gift tax exclusion.
Revenue Procedure 2026-25 provides that qualifying contributions may instead be treated as completed, present-interest gifts.
For 2026, the annual gift tax exclusion is $19,000 per recipient. The safe harbor generally applies when:
- The donor is an individual;
- The donor’s taxable gifts consist only of cash contributions to Trump Accounts;
- Contributions are made before the year the beneficiary turns 18;
- The donor’s total gifts to each beneficiary do not exceed the annual exclusion;
- No gift tax or generation-skipping transfer tax is due; and
- The donor is not otherwise required to file a federal gift tax return.
When these requirements are met, the donor generally will not need to file Form 709 solely to report the Trump Account contribution.
The $5,000 account contribution limit and the $19,000 gift tax exclusion are separate rules. Donors must consider all gifts made to the same child during the year, not just amounts contributed to the account.
Planning Ahead
The safe harbor may simplify gift tax reporting for many families, but it does not apply in every situation. Donors who exceed the annual exclusion, make other taxable gifts or have another Form 709 filing requirement may still need to file a federal gift tax return.
Before contributing, families should consider the account’s annual contribution limit, other gifts made to the child, restrictions on withdrawals before age 18, and the potential tax treatment of future distributions.
If you are considering contributing to a Trump Account or have questions about the gift tax reporting requirements, contact your ShindelRock team. We can help determine whether a contribution may qualify for the safe harbor and how it fits within your broader tax and financial plan.
Written by: ShindelRock
