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Military Finances 201: Trump Accounts Could Come with Paperwork "Issues" Thumbnail

Military Finances 201: Trump Accounts Could Come with Paperwork "Issues"

Taxes Managing Your Finances

The One Big Beautiful Bill Act (OBBBA) added a new type of investment account, the Trump Account. The Trump Account is designed to allow adults to start investing for a child's benefit in a tax advantaged way. As a bit of an over-simplification, a Trump Account functions mostly like an IRA. We're not going to address that in this article. What we do want to cover is paperwork.

To open a Trump Account, you file an IRS Form 4547 (isn't that clever). It can be filed with your tax return. That's the easy part.

How Gift Taxes Affect Contributions to Trump Accounts

Generally speaking, if you make small gifts you don't have to report them to the IRS. They're excluded from income. In 2026, the annual gift tax exclusion is $19,000 per doner per donee. The annual contribution limit to a Trump Account is $5,000, so no problem.

Not so fast Sparky. The annual gift tax exclusion applies to a gift of a present interest. A gift of a present interest means the person who receives the gift can use it now, for any purpose he or she desires. A Trump Account doesn't meet that criteria. The funds are not available until age 18 (unless certain special circumstances apply).

If the gift is not a gift of a present interest, it must be reported.

Reporting a Gift to a Trump Account

Gifts that are not covered by the annual exclusion must be reported on a Gift Tax Return/Form 709. There are a few things to consider when it comes to filing a Form 709

  • Most, if not all, tax software for consumers (not tax preparers) does not include the ability to complete a Form 709
  • Tax preparers charge a fair bit to complete a gift tax return, and the fee could exceed the value of the contribution to the Trump Account (remember, no matter how small, it must be reported)
  • The gift tax return must be retained by the taxpayer to determine if any estate tax is due upon death (taxable gifts decrease the amount that can be gifted in the future or passed via the estate).

Will Contributors to Trump Accounts Have to Pay Estate Taxes?

The OBBBA also increased the Lifetime Exemption (combined Gift and Estate Exemption) to $15,000,000. That means most of us don't have to worry about our estate tax burden as a result of contributing to Trump Accounts. With that said, there is no guarantee the lifetime exemption won't be reduced by a future Congress.

Why Don't the Same Rules Apply to 529 Accounts and Coverdell Accounts?

The Tax Code specifically exempts contributions to these accounts from the rule concerning a gift of a present interest. The Code currently doesn't have language exempting Trump Accounts. As of this writing, there isn't any pending legislation to change this.

Military Finances and Different

The rules about Trump Accounts apply to all taxpayers. That isn't always the case. Active and Retired Military Members have unique tax and financial issues. That is why we think Senior Military Officers and NCO's should work with a financial planner that understands those differences. If you'd like to see how we work with clients just like you, use the button below to schedule a free initial consultation.

If you found this article useful, you might like the following blog posts:

Retired Military Finances 201: Doing the 529 TwoStep


Military Finances 301: Should You Buy a College Condo?


Military Finances 201: Getting Ready to Use US Savings Bonds to Pay for College? It Might Not Work Like You Think


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