The Treasury Department and the Internal Revenue Service (IRS) recently issued guidance regarding the new child IRA accounts, also known as "Trump Accounts." In Revenue Procedure 2026-25, the IRS created a gift tax reporting safe harbor that eliminates a significant administrative concern surrounding contributions to these accounts.

According to the guidance, qualifying contributions by individuals to these accounts will not require the filing of a federal gift tax return, provided certain conditions are satisfied. This guidance is intended to reduce compliance burdens on parents, grandparents and others who wish to contribute to a child's account.

“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,” said IRS Chief Executive Officer Frank J. Bisignano. “The relief granted will reduce the potential burden placed on friends and family who want to put money into a Trump account.”

The uncertainty arose because contributions to Trump Accounts could have potentially been characterized as gifts of future interests. Future interest gifts generally do not qualify for the annual gift tax exclusion and, therefore, may require gift tax reporting even though no gift tax is ultimately due. Under the new safe harbor rules, the IRS will treat qualifying contributions as completed gifts instead of future interest gifts, making them eligible for the annual gift tax exclusion. The annual gift tax exclusion amount in 2026 is $19,000, indexed for inflation.

The safe harbor applies only to individual donors and only if the donor's taxable gifts during the calendar year consist exclusively of cash contributions to one or more Trump Accounts. Contributions must be made in cash, including by check, money order or an electronic funds transfer and must be completed before the beneficiary reaches age 18.

As a reminder, Trump Accounts generally may receive contributions from parents or other individuals, employers of those with eligible dependents, charities and governmental entities, subject to an annual contribution limit of $5,000 per beneficiary, indexed for inflation beginning after 2027. The federal government will also make a one-time $1,000 contribution for eligible children born between January 1, 2025, and December 31, 2028, if a timely election is made.