When is a gift a taxable gift?
Each taxpayer has a lifetime limit on the amount of gifts they can make before any tax is paid on those gifts. The lifetime exclusion is adjusted each year for inflation, with the 2026 exclusion sitting at $15 million. When a gift tax return is filed, the taxpayer uses the Applicable Credit to determine if any gift tax liability exists. The credit amount is generally equal to the total amount of tax on the lifetime exclusion.
In addition to the lifetime exclusion, there is an annual exclusion for gifts of present interest. You can give up to the annual exclusion ($19,000 for 2026), and those gifts are not treated as taxable gifts that count towards the lifetime exclusion. The catch is that gifts that qualify for the annual exclusion have to be gifts that the recipient can enjoy immediately (ie, gifts of present interest). If they have to wait, that’s a gift of a future interest, and those gifts, even if they’re $1, are taxable and must be reported on Form 709.
Just because a taxable gift is made doesn’t mean that the individual will have to pay any gift tax. Gift tax is due once the lifetime exclusion is exceeded, so most gifts, even those that are over the annual exclusion, won’t generally result in gift tax being paid.
What does this have to do with Trump accounts?
When someone makes a contribution to a Trump account, the funds can’t be accessed at any time during the “growth period,” which ends January 1 of the year the account beneficiary reaches age 18. Since the money cannot be distributed until the growth period ends, the beneficiary can’t enjoy that cash right now, making it a gift of future interest. This means that any contribution to these accounts would require the giver to file a gift tax return to report the taxable gifts.
If you’re just trying to give your grandkids a head start on their retirement savings, this could create a substantial reporting burden. Since over 6 million Trump accounts have been opened so far, this would also place a substantial burden on the IRS as it tries to process all the required Forms 709. This is where the safe harbor comes in.
Who is eligible?
Not everyone who makes contributions to Trump accounts will be spared from filing the gift tax return.
The new safe harbor requires that:
- The taxpayer must be an individual
- The only taxable gifts made by the taxpayer during the calendar year are cash (checks, money orders, or electronic funds transfers all count as cash) contributions to one or more Trump accounts, each made before the calendar year in which the account beneficiary attains age 18
- The taxpayer’s total gifts during the calendar year to each individual who is an account beneficiary, including contributions to that account beneficiary’s Trump account, are not more than the annual exclusion amount
- The contributions made during the calendar year don’t generate a gift tax or generation skipping transfer (GST) tax liability (taking into account the Applicable Credit)
- Disregarding the Trump account contributions, no gift tax return is required to be filed, and no gift tax return is otherwise filed for that calendar year or on behalf of the taxpayer, whether for GST tax, portability, or other purposes
Let’s break this down:
Betty wants to put $5,000 into each of her 3 children’s Trump accounts in 2026. She makes no other gifts during the year.
Even though the contribution to the accounts is a gift of future interest, Betty will not be required to file a gift tax return because she is eligible for the safe harbor.
If, in addition to the Trump account contributions, Betty had also given each of her kids $15,000 cash, she would be over the annual exclusion and would be required to file a gift tax return and include the contributions to the Trump accounts as taxable gifts.
The Gift that Keeps Giving
This safe harbor will offer relief to many taxpayers hoping to contribute to Trump accounts and to the systems at the IRS, but it does not mean that everyone is off the hook for gift tax returns.
What it really means is that when clients call asking if they have to file a gift tax return for their contributions, the answer will now be a resounding “it depends.”