Babies will get their $1,000 ‘Trump accounts’ in 2026 – along with tax complications
Newborns can look forward to the promised Trump accounts in the new year, but if parents, grandparents, friends or relatives plan to contribute, they can look forward to a tax headache, experts said.
Trump accounts are savings accounts to encourage children and families to save and build wealth for the many expenses of adulthood. Starting in July, the government will seed the accounts with $1,000 for all children born between 2025 and 2028 with a Social Security number, thanks to the tax and spending package passed last summer. Parents and others may contribute up to $5,000 a year, with employers allowed to contribute half of that cap, into the accounts until the child turns 18.
But since individual contributions don’t qualify for the gift tax annual exclusion, the donor must file a gift tax return, or Form 709, for each contribution whether it’s the $25 minimum or the $5,000 maximum, experts said. That may sound like a small inconvenience, until Americans discover Form 709 isn’t generally available on do-it-yourself tax platforms like TurboTax or Jackson Hewitt and may require an accountant, said Amber Waldman, estate and gift senior director in RSM’s Washington National Tax practice.
This is a “significant tax compliance issue,” she said.
Contributions to Trump accounts aren’t included as part of the annual gift tax exclusion of $19,000 per person because they aren’t considered gifts of “present interest.” Gifts of “present interest” means the recipient can access and immediately use the gift. Trump account money generally isn’t available until the child turns 18.
Educational 529 savings plans were exempted by Congress. When 529s were created, Congress explicitly said contributions “shall be treated as a completed gift to such beneficiary which is not a future interest in property.”
Neither the IRS nor Treasury can fix this administratively, Waldman said. Congress would have to act and so far, there have been no such legislative proposals.
Failing to file even if you owe no tax still creates risk, she warned. “The IRS can use an omission against taxpayers in an audit,” she said.
Americans can file Form 709 by printing, completing and mailing the form to the IRS or file it electronically, typically through an authorized provider or business using the IRS’ Modernized e-File (MeF) system.
If taxpayers choose to use an accountant, “the filing could cost more than the contribution itself,” Waldman warned.
Pon said this is “the gifting trap for Trump accounts.”
