IRS Removes Gift Tax Burdens on Trump Account Contributions

The Internal Revenue Service (IRS) and the Department of the Treasury have issued new guidance offering tax relief for Trump Account contributions.“If certain requirements are met, contributions made by individual donors to Trump accounts in a given year will not be subject to gift tax reporting requirements for that year,” the IRS said in a June 29 statement. Trump Accounts can be opened in the name of any child younger than 18 years of age, who is a U.S. citizen with a valid Social Security Number. These accounts can receive up to $5,000 in annual contributions from various sources, including the child’s parents, government, and parents’ employers.Typically, an individual making taxable gifts in any calendar year is mandated to file a gift tax return detailing such transactions. Public comments were raised on whether Trump Account contributions would be considered taxable gifts that must be reported.The guidance clarified that individuals who make such contributions can be excluded from gift tax reporting provided that the only taxable gifts they make during a calendar year are in cash contributions to one or more Trump accounts.Each of these contributions must be made before the calendar year in which the account beneficiary turns 18 years of age. Cash contributions include money orders, checks, and electronic fund transfers.“By granting this relief, the IRS has responded to concerns raised by taxpayers who planned to make contributions to a Trump account but worried such donations would trigger the gift tax reporting rules,” IRS Chief Executive Officer Frank J. Bisignano said.“The relief granted will reduce the potential burden placed on friends and family who want to put money into a Trump account.”The total gifts during a calendar year made to a Trump Account beneficiary, including contributions to the Trump Account itself, must not exceed the annual gift tax exclusion threshold, which for 2026 is $19,000.As such, as long as an individual caps the contribution to a beneficiary’s Trump Account at $5,000 for a year and ensures that additional gifts to the beneficiary do not exceed $14,000, there isn’t a requirement to pay taxes on these amounts or file a gift tax return. The total amount of all gifts they made during their lifetime must also not exceed $15 million.The clarification comes ahead of July 4, when contributions to Trump Accounts can begin. As of June 4, nearly 6 million Trump Accounts have been opened.Investing in Trump AccountsThere are concerns about the impact of Trump Accounts on wealth inequality, regarding how much each household can contribute to their children’s accounts, according to a report by Brendan McDermott, an analyst in public finance at the Congressional Research Service.“Households generally receive more benefit from Trump Accounts if they are more able to save money in them. Households with higher income and wealth have more resources available to contribute to the accounts, and they may be more familiar with the rules and benefits pertaining to the accounts,” McDermott said in the report.On the plus side, Trump Accounts could facilitate wealth building by encouraging people to save more of their income, money that would have been otherwise spent.In a March 2025 paper, the Milken Institute projected that a single $1,000 contribution to a Trump Account could grow to $8,000 on average after 20 years.During a February press briefing, White House press secretary Karoline Leavitt said that if a parent were to contribute to their child’s Trump Account up to the permissible limit, the account could be worth more than $1 million when the child turns 28, according to historical stock market returns.Meanwhile, the American Institute of CPAs, also known as AICPA, is encouraging families to learn more about Trump Accounts to make informed decisions.Unlike a traditional savings account, money from the Trump Accounts is invested in low-cost stock market index funds, creating the potential for long-term growth, the institute said in a June 26 statement.“Education should always come before contribution,” said Cary Sinnett, director of personal financial planning at the AICPA. “These accounts, like many investment vehicles, are complex, so understanding how they work is essential in order to best use them and decide whether they should act as sole investments or be combined with other helpful savings plans.”