IRS Safe Harbor Lets Relatives Fund Trump Accounts Without Filing a Gift Tax Return

Grandparents and other relatives who put money into a child's Trump Account will not have to file a gift tax return for it, as long as they stay inside a narrow set of conditions. The Treasury Department and the IRS issued Revenue Procedure 2026-25 on June 29, 2026, five days before the accounts could first be funded, settling a question that had left estate planners uneasy for months.

What changed

A Trump Account is a form of traditional IRA for a child under 18, created by the 2025 tax law. During the growth period, which runs until January 1 of the year the child turns 18, the child generally cannot take money out. That restriction is what created the problem. The gift tax annual exclusion, $19,000 per recipient for 2026, applies only to gifts of a present interest. A gift the recipient cannot touch for years looks like a future interest, and future-interest gifts must be reported on Form 709 no matter how small.

In a June 22 analysis, CBIZ noted that some practitioners read contributions that way and that Treasury and the IRS had acknowledged the ambiguity. The revenue procedure answers it with a safe harbor rather than a change in the underlying law: for donors who qualify, each contribution is treated as a completed gift that is not a future interest, and the annual exclusion applies for gift tax, generation-skipping transfer tax and reporting purposes.

The IRS explained its reasoning with numbers. It received roughly 300,000 gift tax returns in fiscal 2025, and nearly six million elections to open Trump Accounts had arrived by June 4, 2026. Without relief, it said, annual gift tax filings could climb from about 300,000 to several million, mostly from donors who will never owe tax given the $15 million lifetime exemption.

Who qualifies

The safe harbor applies for a calendar year only if all five conditions are met:

1. The donor is an individual.
2. The donor's only taxable gifts that year are cash contributions to one or more Trump Accounts, made before the year the child turns 18.
3. Total gifts to each child, including the account contribution, do not exceed the annual exclusion.
4. The contributions create no gift or GST tax after applying the donor's remaining exemption.
5. Setting the contributions aside, no gift tax return is required or filed for that year for any purpose, including GST allocations or portability.

The after-tax math

The revenue procedure's own example shows how fragile the relief is. A donor gives $5,000 to each of three grandchildren's Trump Accounts and a separate $13,000 in cash to one of them. That grandchild's total is $18,000, under the $19,000 exclusion, so the safe harbor applies and no Form 709 is needed.

In the second case, a $1,500 overage on one grandchild pulls every Trump Account contribution that year onto the return as a future-interest gift. No tax is likely to be due, but the exclusion no longer shelters those amounts, so they use up part of the donor's lifetime exemption.

Moves to discuss with your advisor

Affluent families often already file Form 709 in a given year: for a gift to a trust, a large front-loaded 529 plan gift, a GST allocation or a gift of real estate. Under condition five, any of those takes the donor outside the safe harbor for that year. Households in this situation often consider sequencing gifts, for example making Trump Account contributions from a spouse or grandparent who files no return that year, or folding the contributions into a return that is being filed anyway. Because the account's $5,000 annual limit is shared across all contributors, family members may also want to coordinate who gives. These are questions worth raising with a CPA or estate attorney before the year's gifts are made.

What to watch

The safe harbor covers cash gifts from individuals only. It does not address employer contributions, which are excluded from income up to $2,500, or broader regulations on contributions and distributions that Treasury has said are still coming. Donors should keep records showing they met each condition, since the revenue procedure treats that documentation as a general tax record the IRS can ask to see.

After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.