Trump Account Tax Relief
IRS Issues New Rules for Trump Accounts, Easing Gift Tax Reporting for Families
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Key Points
1
Trump accounts operate within a defined 'growth period' during which distributions are restricted; this growth period ends before January 1 of the calendar year in which the account beneficiary turns 18, after which distributions and related rules apply differently.
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The Trump accounts were created by Public Law 119-21 (One, Big, Beautiful Bill Act) and are defined as traditional IRAs under section 530A, owned by an eligible individual (the account beneficiary) with eligibility criteria including under-18 status at initial election and a valid SSN.
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The safe harbor for gift tax reporting applies only to donors whose sole taxable gifts in the year are cash contributions to Trump accounts, with a 2026 annual cap of $19,000 for qualifying gifts.
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A seed-deposit program is mentioned, including a $1,000 seed deposit for eligible children born between 2025 and 2028 as part of the Trump accounts initiative.
The IRS issued Revenue Procedure 2026-25 on June 29, 2026, giving donors a break on gift tax paperwork for contributions to "Trump Accounts." Under the new safe harbor, cash gifts up to $19,000 to these accounts in 2026 will not require donors to file a gift tax return, as long as those gifts are their only taxable gifts for the year, according to CNBC.
IRS CEO Frank Bisignano said the relief "responds to concerns raised by taxpayers" and will "reduce the potential burden placed on friends and family" who want to fund these accounts. The move comes just days before July 4, 2026 — the official "Funding Day" when the federal government begins distributing $1,000 seed deposits to eligible accounts, according to Accounting Today.
What Trump Accounts Are and How They Work
Trump Accounts are a new type of savings account for children under 18. They were created by Public Law 119-21, also called the "One Big Beautiful Bill Act," signed by President Trump on July 4, 2025. They work like traditional IRAs, but the child does not need earned income to qualify. Parents, grandparents, and even employers can contribute, according to Bloomberg Law.
Funds in these accounts must be invested in mutual funds or ETFs that track a U.S. stock index, like the S&P 500. Withdrawals are blocked during the "growth period," which ends the year before the child turns 18. After that, distributions are taxed as ordinary income. The White House Council of Economic Advisers projects a child could have $303,000 by age 18 with medium returns, assuming the $1,000 seed deposit and maximum annual contributions.
The $19,000 Safe Harbor Cuts Red Tape for Families
Before this ruling, any cash gift to a Trump Account could technically require the donor to file IRS Form 709, the gift tax return. But since the lifetime gift tax exclusion sits at $15 million in 2026, almost no one actually owed any tax. Requiring a form for a $5,000 gift to a child's account was widely seen as an "administrative hurdle" with no real tax benefit, according to Bloomberg Law.
Revenue Procedure 2026-25 fixes that. Donors who give only cash to Trump Accounts — and stay under the $19,000 cap — skip the filing entirely. The safe harbor applies only if those gifts are the donor's sole taxable gifts for the year. The IRS says the goal is to make it easier for families to fund these accounts without extra paperwork, according to CNBC.
Seed Deposits, Private Pledges, and Early Sign-Ups
Children born between January 1, 2025, and December 31, 2028, get a $1,000 federal seed deposit. As of early June 2026, families had already submitted 6 million Trump Account elections through IRS Form 4547 or the TrumpAccounts.gov portal. BNY Mellon was named the lead financial agent, with Robinhood serving as the main mobile app interface, according to Bloomberg Government.
Children born between 2014 and 2024 — too old for the federal seed — got a private lifeline. Michael and Susan Dell pledged $6.25 billion in December 2025 to provide $250 bridge grants to roughly 25 million of those older children. The standard annual contribution limit during the growth period is $5,000, and employers can contribute up to $2,500 per year tax-free, according to Bloomberg Government.
AICPA Urges Caution as Critics Flag Medicaid Trade-Offs
The American Institute of CPAs welcomed the reduced paperwork but urged families to "educate themselves" on the long-term tax picture. Withdrawals after age 18 are taxed as ordinary income — a detail easy to overlook when focusing on the upside. The AICPA also noted the safe harbor only covers donors whose sole taxable gifts for the year are Trump Account contributions, according to Accounting Today.
The broader "One Big Beautiful Bill Act" drew sharp criticism because it also cut roughly $1.15 trillion from Medicaid and health subsidies to help pay for the tax programs. The Congressional Budget Office projected about 10 million people could lose health insurance as a result. Opponents argue the very children receiving $1,000 accounts may lose access to health care under the same law.
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