An expert welcomed the IRS’ recently announced gift tax reporting safe harbor for Trump account contributions — but he cautioned that donors who exceed the annual exclusion threshold with other gifts could face unexpected filing requirements.
Trump account gifts and the ‘future interest’ problem
IRC § 530A established Trump accounts as a new type of tax-favored individual retirement account (IRA) to help children start investing early. However, because the rules restrict a child’s access to the funds until they turn 18, contributions raised a technical gift tax concern.
Under IRC § 2503(b), gifts of a “future interest” in property do not qualify for the annual gift tax exclusion, which is $19,000 for 2026. This meant any contribution to a Trump account, regardless of size, could have been considered a future interest gift that required the donor to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
This created a potential burden for donors and a processing challenge for the IRS. The agency estimated that with nearly six million Trump accounts already established, the number of gift tax returns filed annually could “increase from roughly 300,000 to several million” without a fix.
Ben Sunshine, a senior associate in Brinkley Morgan’s wills, trusts, and estates practice, agreed with that assessment. Without a fix “the amount of gift tax returns the IRS would be receiving would probably explode,” said Sunshine.
New safe harbor announced
To address this, the IRS recently issued Rev Proc 2026-25, which creates a safe harbor that treats certain contributions to Trump accounts as completed gifts that are not future interests. As a result, donors who meet the safe harbor’s requirements will not need to file a gift tax return to report the contributions.
To qualify for the safe harbor in a given year, a donor must meet several requirements. The donor must be an individual and their total gifts to any single person during the year must not exceed the annual gift tax exclusion amount ($19,000 for 2026). The donor also must not have any other reason to file a gift tax return for the year.
While the guidance provides relief, Sunshine said it functions less like a cushion and more like a cliff.
Coordinated family gifting is key
Sunshine stressed that donors and tax advisors “need to be cognizant” of overall yearly gifts, despite the safe harbor. “If your contributions or gifts to the donee go above the $19,000 threshold — let’s say you have $5,000 to the Trump account, and then you have $15,000 to a 529 — then you’re going to have to file a 709 gift tax return,” he said.
Overall, Sunshine sees Trump accounts as another tool for families that meets a different need than qualified tuition programs under IRC § 529 or custodial accounts. In his view, there was a “gap” in child savings vehicles that Trump accounts now fill.
“I think it fits perfectly well with 529,” he said, noting the two accounts serve different purposes. “529 is for college. Trump account is for retirement.” Because of this, Sunshine said he “wouldn’t be surprised if people have both” a 529 plan and a Trump account for the same child.
However, the use of multiple savings vehicles for one child makes careful tracking of total gifts essential. Sunshine suggests those making gifts to children engage in a “bigger dialogue” about Trump account contributions and other gifts to ensure they don’t lose the safe harbor.
Future guidance needed
Sunshine noted that questions remain about how Trump accounts will work long-term. When a child turns 18, their Trump account is treated as a traditional IRA. He said he would like to see guidance from the IRS on whether that traditional IRA can then be converted to a Roth IRA.
At age 18, the Trump account holder would likely be in a low tax bracket, Sunshine explained. “The amount of tax that they would need to pay in order to do the conversion would be a lot less,” he added. This would allow the young adult to pay a small amount of tax on the conversion and then enjoy tax-free growth and withdrawals in retirement.
For more on Trump accounts, see Checkpoint’s Federal Tax Coordinator 2d ¶ A-4651.
Take your tax and accounting research to the next level with Checkpoint Edge and CoCounsel. Get instant access to AI-assisted research, expert-approved answers, and cutting-edge tools like Advisory Maps and State Charts. Try it today and transform the way you work! Subscribe now and discover a smarter way to find answers.
