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Volume 4: Gifts, States and Your Checklist · Chapter 10

Grandparents, Read This Before You Give: The Gift Tax Rule

A grandparent can give $5,000 to a Trump account with no gift tax return, if five IRS tests are met. See the tests, a worked example and the records to keep.

  • Read time: 6 min
  • Complexity: Intermediate
  • Topic: Gifts

SwitchWize Research DeskReviewed by Jay Rege, Head of Financial Research, on Oct 8, 2026Updated Oct 9, 2026

The short answer

A grandparent can give cash to a grandchild's Trump account and file no gift tax return, if five IRS tests are met for the year. The usual way to fail is giving that child a large other gift. Keep a record of each gift either way.

The IRS expected gift tax returns to jump from about 300,000 a year to several million. The cause was Trump accounts. Nearly six million elections had arrived by June 4, 2026. A gift tax return, Form 709, is the form that reports large gifts. On June 29, 2026, the IRS issued Revenue Procedure 2026-25 to spare most donors that form.

Chapter 4 deep diveThe $5,000 Limit: Who Can Give and the December 31 DeadlineThat chapter covers the $5,000 yearly limit that every donor shares. This chapter covers the separate gift tax rule.

Why would a gift to a Trump account need a tax form?

Gifts have a yearly tax-free amount for each person who receives them. For 2026 it is $19,000. Gifts under it need no return.

One catch: the yearly amount works only for gifts the child can use now. A gift the child cannot touch until later is called a gift of a future interest. It needs a return even when it is small.

A Trump account is locked until the year the child turns 18. That looks like a future interest. Without a fix, a grandparent giving $5,000 might have had to file Form 709.

What is the rule?

For donors who meet the tests, Revenue Procedure 2026-25 treats a cash gift to a Trump account as a present gift, not a future one. The yearly amount applies, and no return is needed. Here are the five tests for each calendar year.

1
In plain words
You are an individual, not a trust or a company
2
In plain words
The only taxable gifts you make that year are cash gifts to Trump accounts, made before the child's year of turning 18
3
In plain words
Everything you give each child, the account included, is $19,000 or less
4
In plain words
You owe no gift tax or generation-skipping tax for the year
5
In plain words
You file no gift tax return for another reason that year

Cash means cash, a check, a money order or an electronic transfer. Gifts of stock or other property do not fit test 2.

How does it work with real numbers?

This example is made up, though it follows the IRS's own. A grandmother has two grandchildren. In 2026 she gives $5,000 to each child's Trump account. That is $10,000 in all.

She also gives the older grandchild $13,000 in cash for a birthday. The older child's total is $18,000, which is under $19,000. All five tests are met. She files nothing.

$5,000 to the account plus $13,000 cash
Total that year
$18,000
Result
Under $19,000, no return needed
$5,000 to the account plus $14,500 cash
Total that year
$19,500
Result
$500 over, return needed

In the second row, she must file Form 709 for all her 2026 gifts. The IRS example says the Trump account gifts are then reported as future interests. For most families, that costs time and a little paperwork, not tax. The IRS says most donors will never owe gift tax, because the lifetime amount is $15 million for 2026.

Do I need to file a gift tax return?

  1. Only cash to Trump accounts?

    If you also gave other taxable gifts, the rule does not apply.

  2. Each child at or under $19,000?

    Add every gift to that child, the account included.

  3. Any other reason to file?

    If you file Form 709 for any other reason, the rule is lost.

  4. All clear: no return

    Keep a record of dates, amounts and which child.

Check these in order for one calendar year.

Can both grandparents give?

Yes. Each grandparent is a separate donor with a separate $19,000 for each child. Each one meets the five tests on their own. The Trump account still takes only $5,000 a year from everyone together, so the grandparents and parents must still agree on one total.

What if you do need to file?

Filing Form 709 does not mean you owe tax. The lifetime amount for 2026 is $15 million. Say a donor gives $5,000 to each of three Trump accounts and has to report the gifts as future interests. That is $15,000 reported. It would use $15,000 of the $15 million, leaving $14,985,000. The cost is the form, not a bill.

What does the rule not cover?

  • The $5,000 account limit. The account takes $5,000 a year from everyone combined. Employer money counts toward it. The federal $1,000 does not. A tax rule that allows more gifts does not let the account take more. See the contribution limit chapter.
  • Extra deposits. Section 530A applies the IRA excess-deposit rules to Trump accounts. For IRAs, the extra tax on an excess is 6% a year.
  • Married donors. Splitting gifts with a spouse is done on Form 709. That can cost you test 5. Ask a tax professional first.
  • State taxes. This is a federal rule. The next chapter covers states.

When should you check before giving?

Check before you give, not after. Add up what you have already given each child this year, including birthday cash. Also ask whether anyone in the family plans a large gift later in the year, such as help with a house. One large gift can undo the shortcut for every earlier gift in that same year. A short call with a tax professional costs less than a late return.

What records should a grandparent keep?

The IRS says donors should keep records that show the tests were met. Treat this as a one-page log:

  1. The date of each gift.
  2. The amount and how it was sent.
  3. Which child received it.
  4. The confirmation from the account.
  5. Any other gifts to the same child that year.
Chapter 11 deep diveYour State May Tax What Washington Does NotA federal safe harbor does not settle state tax. The next chapter lists what to ask your state.

Limits of this guide.

  • This is general information, not tax or legal advice. Ask a tax professional about trusts, gift splitting or large gifts.
  • The $19,000 figure applies to 2026 gifts. It is set each year.
  • Examples use made-up gifts.

Frequently asked questions

Do grandparents owe gift tax on a Trump account contribution?

Almost never. The IRS says most donors will never owe federal gift tax, because the lifetime amount is $15 million for 2026. The real question is whether a Form 709 gift tax return is needed. Revenue Procedure 2026-25 says it is not, if five tests are met for that calendar year.

What are the five tests in Revenue Procedure 2026-25?

The donor is an individual. The only taxable gifts that year are cash gifts to Trump accounts made before the child's year of turning 18. Total gifts to each child stay at or under $19,000. No gift or generation-skipping tax is owed. No other gift tax return is required or filed for that year.

Is the $5,000 Trump account limit the same as the $19,000 gift limit?

No. The $5,000 limit is the most the account accepts in a year from everyone except the federal $1,000 deposit. The $19,000 figure is the gift tax exclusion per person receiving gifts. A grandparent can pass the gift test with a large gift and still be unable to put more than $5,000 into the account.

What if I gave one grandchild more than $19,000 this year?

Then the no-return rule does not apply for that year. You file Form 709 for all of that year's gifts, and the IRS example says to report the Trump account gifts as gifts of future interests. In most cases that means paperwork, not tax, because of the $15 million lifetime amount.

Sources

Educational content, not individualized financial, tax or legal advice. Examples use hypothetical figures unless a source is cited. Report an error at our corrections page.