IRS Offers Safe Harbor For Trump Account Contributions

Created under the One Big Beautiful Bill Act, Trump Accounts are a new, custodial-style traditional IRA that can be established for any U.S. citizen who has not reached age 18 during the calendar year and has a Social Security number.  The maximum aggregate annual contribution per Trump Account beneficiary cannot exceed $5,000 (indexed for inflation beginning in 2028).  In general, withdrawals from a Trump Account are permitted beginning January 1 of the calendar year the beneficiary turns 18 but withdrawals taken before the beneficiary reaches age 59½ are subject to a 10% early distribution penalty. 

Because the beneficiary cannot freely access the contributions during the growth period (before the beneficiary turns 18), taxpayers have questioned whether contributions to a Trump Account should be treated as a “future interest” in property.  Under longstanding gift tax rules, future-interest gifts do not qualify for the annual per-donee gift tax exclusion ($19,000 for 2026) and must be reported on a gift tax return. 

Recognizing that a “yes” answer to this question would require several million new gift tax filings each year and create a substantial compliance burden for taxpayers and a significant administrative strain on the IRS, the IRS have issued Revenue Procedure 2026-25 which creates a gift tax reporting safe harbor for certain contributions to Trump Accounts. If a taxpayer meets all of the safe harbor requirements for a given calendar year, contributions to a Trump Account will be treated as a completed gift that is not a future interest.  As such,  the contributions will qualify for the annual exclusion and relieve the donor of any gift tax return filing obligation for those contributions. The safe harbor requirements are:

1. The taxpayer is an individual;
2. The only taxable gifts made by the taxpayer during the calendar year are cash contributions to one or more Trump Accounts, each made before the beneficiary attains 18;
3. The taxpayer’s total gifts during the calendar year to each account beneficiary (including Trump Account contributions) do not exceed the annual exclusion amount;
4. Contributions to the Trump Accounts during the calendar year do not generate gift or generation-skipping tax (GST) liability after applying the donor’s remaining lifetime gift tax exclusion or GST exemption; and
5. No gift tax return is otherwise required or filed for that calendar year for any other reason (e.g., portability elections or GST allocations).

If any of the above requirements are not met, the safe harbor does not apply and the donor must file a gift tax return reflecting the Trump Account contributions as future-interest gifts.  The Revenue Procedure provides the following example to explain the requirements:

In calendar year 2026 individual donor (Taxpayer) contributes $5,000 cash to each of three Trump Accounts established for account beneficiaries A, B, and C and makes an additional gift to C of $13,000 cash. Taxpayer makes no other gifts during the calendar year and is not required to, and does not, file a gift tax return for the calendar year for any other purpose. The $15,000 in contributions to Trump accounts do not generate a gift or GST tax liability after taking into consideration the Taxpayer’s remaining lifetime applicable gift tax exclusion amount and remaining GST exemption. Under these facts, the requirements of the Revenue Procedure are met and Taxpayer’s 2026 Trump Account contributions will be treated as completed gifts to A, B, and C that are not future interests in property. If instead Taxpayer’s cash gift to C in 2026 is $14,500, the requirements of the Revenue Procedure are not met because Taxpayer’s total gifts to C during calendar year 2026 exceed the annual per donee gift tax exclusion of $19,000. Accordingly, Taxpayer must file a gift tax return for calendar year 2026 reporting all 2026 gifts and must report the Trump Account contributions to A, B, and C as gifts of future interests.

Clients making larger gifts, multiple Trump account contributions to the same beneficiary, or gifts that otherwise trigger a filing obligation are advised that the safe harbor may not apply, and careful tracking of cumulative gifts per beneficiary remains essential. 

If you have any questions regarding this alert, please contact your Cummings & Lockwood private clients attorney.