A Trump account employer contribution is the business side of one of 2026’s most-searched tax topics, with “Trump accounts” averaging more than 100,000 US searches a month on Google. For an established employer, the real questions are what it costs, what the rules require, and whether the owners themselves can benefit. This guide covers what employers can contribute and what the August 2026 proposed regulations mean for business owners.
In this article
01 · The basics
What Is a Trump Account?
A Trump account is a type of traditional IRA for a child, created by the One Big Beautiful Bill Act. Special rules apply during the “growth period,” which ends Dec. 31 of the year when the child turns 17.
Here are the key rules, from the IRS’s Notice 2025-68 and the August 2026 proposed regulations:
02 · The limits
How Much Is a Trump Account Employer Contribution?
An employer can contribute up to $2,500 per employee per year to the Trump account of the employee or the employee’s dependent, and that amount is excluded from the employee’s income. The limit is $2,500 for 2026 and 2027 and is indexed for inflation after that.
$2,500 per employee, not per child
An employee with three children still has one $2,500 exclusion, which the plan can split among their accounts.
$2,500 across all employers
An employee with two jobs can exclude at most $2,500 in total for the year.
Counts toward the $5,000 account limit
Employer money reduces how much family members can add that year.
Excess is taxable wages
Anything an employer contributes above the limit, or outside a qualifying program, is compensation to the employee.
03 · The plan
What a Trump Account Contribution Program Requires
The exclusion only works through a “Trump account contribution program”: a separate written plan that follows its own terms. If the arrangement doesn’t qualify, contributions are taxable income to employees.
Under the proposed regulations, the program must:
1
Be in a separate written plan that spells out eligible employees, contribution amounts, whether salary reduction is allowed, how employees designate accounts, the plan year and correction procedures.
2
Give eligible employees reasonable notice of the program and its terms.
3
Verify that each account is a valid Trump account. Employers may rely on an employee’s written certification of the child’s relationship and birth date, but that certification alone isn’t enough to confirm the account itself.
4
Tell the trustee that each payment is a Section 128 contribution and send a corrective notice if that later turns out to be wrong. The proposed rules treat 21 calendar days as a reasonable time for the correction.
5
Report the contributions to employees, which can be done on Form W-2 in box 12 with code TA.
6
Allow contributions to any Trump account trustee, since each child can have only one Trump account.
Employees can also contribute pre-tax through salary reduction under a Section 125 cafeteria plan, but only to a dependent’s account, not their own. The cafeteria plan must let employees change or revoke those elections at least monthly.
Good to know
The rules are still proposed. The proposed regulations state that taxpayers may rely on them for plan years beginning before final regulations are published.
04 · Testing
The Nondiscrimination Rules
A Trump account contribution program can’t favor highly compensated employees (HCEs). If it fails the tests, HCEs lose the exclusion, while other employees keep it.
The proposed regulations apply three tests borrowed from the dependent care rules:
Test 1
Same terms for everyone eligible
Contributions must be offered on the same terms to all eligible employees, even if they end up receiving different amounts because of their own elections.
Test 2
A reasonable eligibility classification
Eligibility must rest on objective business criteria such as job category or location, never a list of names. A numerical safe harbor compares the share of non-HCEs who are eligible with the share of HCEs who are eligible; it starts at 90% and adjusts for workforce mix.
Test 3
The 55% average benefits test
Average contributions to non-HCEs must be at least 55% of average contributions to HCEs, counting only employees who receive something.
Employees under 21 or with less than one year of service can be excluded from testing. Employers that simply match the $1,000 federal pilot contribution, on the same terms for all non-excluded employees, get a safe harbor from two of the three tests. If the average benefits test fails, the employer can fix it by including the excess in affected HCEs’ income by the Form W-2 deadline.
05 · For business owners
Can Business Owners Use This for Their Own Children?
Generally, no, not under the proposed regulations. Partners, sole proprietors and 2-percent shareholders of an S corporation aren’t “employees” for Section 128, so they can sponsor a program for their staff but can’t participate in it themselves.
Can sponsor, can’t participate
Partners
Sole proprietors
2-percent S corporation shareholders
Their spouse, child, parent or grandparent (family attribution)
Can participate
W-2 employees, including associates and staff
Shareholder employees of a C corporation
Subject to the nondiscrimination tests
This is the detail owners most need to know. The proposed rules adopt the common-law definition of employee and expressly exclude self-employed individuals and 2-percent S corporation shareholders under Section 1372(b). Under Section 1372(b), ownership is counted using the Section 318 family attribution rules, so a spouse, child, parent or grandparent of a 2-percent shareholder is treated as one too. Check before treating a relative who works in the business as eligible.
Shareholder employees of a C corporation can participate. Any plan that includes them still has to pass the nondiscrimination tests.
For professional firms
A law firm or other professional practice organized as a partnership can sponsor a program for associates and staff who are W-2 employees, but the partners themselves aren’t eligible under the proposed rules. The same applies to 2-percent shareholders of an S corporation.
06 · The cost
What It Costs the Business
The employer pays the contribution plus payroll taxes on it. Under the proposed regulations, Section 128 contributions are excluded from income tax but are still wages for FICA and FUTA, though they aren’t subject to federal income tax withholding.
Here is a hypothetical. A company matches the $1,000 pilot contribution for 10 employees with eligible newborns.
That’s $10,000 in contributions plus the employer’s 7.65% share of FICA, or $765, and each employee also owes their own FICA share on the $1,000. Grant Thornton notes that employer contributions would be deductible business expenses.
Salary reduction works differently. When employees fund a dependent account pre-tax through a cafeteria plan, the proposed regulations note that the cost shifts from salary to benefits without increasing the employer’s total cost.
07 · The decision
Is It Worth Offering?
For a small or mid-sized employer, the lowest-cost version is adding salary reduction for dependents’ accounts to an existing cafeteria plan. A direct employer contribution is a new cost and makes the most sense where family benefits help recruiting and retention.
The IRS expects mostly large employers to adopt these programs, and it estimates the written plan takes no more than three hours to prepare. The real work is in payroll setup: W-2 coding, trustee communication, and the year-end testing. Before announcing anything, confirm your payroll provider can handle the W-2 box 12 code TA reporting and the trustee’s notices.
If you do offer it
Budget it like any other benefit.
Include the contributions, the employer’s share of FICA on them, and the administrative time, and decide on it as part of the 2027 budget rather than mid-year.
At Proseer, we help business owners weigh benefits like this inside their budget and tax plan, so the decision reflects the full cost and who can actually participate.
08 · FAQ
Frequently Asked Questions
Can my employer contribute to my child’s Trump account?
+
Yes, if your employer has a Trump account contribution program. Up to $2,500 a year, combined for all your children and all your employers, is excluded from your income for 2026 and 2027. Contributions above that are taxable wages.
Are Trump account contributions tax deductible?
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Not for individuals. Contributions from parents and other individuals aren’t deductible; they’re made with after-tax dollars and create basis in the account. Employer contributions under a qualifying program are excluded from the employee’s income instead, and employees may be able to contribute pre-tax for a dependent through a cafeteria plan.
Are employer Trump account contributions subject to payroll tax?
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Yes. Under the proposed regulations published Aug. 11, 2026, Section 128 contributions are wages for FICA and FUTA purposes, though they aren’t subject to federal income tax withholding.
Can an S corporation owner receive Trump account contributions from their company?
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No, not if they’re a 2-percent shareholder. The proposed regulations exclude 2-percent S corporation shareholders, partners and sole proprietors from Section 128, though they can sponsor a program for their employees.
When can employers start making Trump account contributions?
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Employers have been able to contribute since July 4, 2026. Employers may rely on the proposed regulations published Aug. 11, 2026, for plan years beginning before the rules are finalized.
The bottom line
Decide Before You Announce It
A Trump account employer contribution can be a simple, visible family benefit, but the plan, payroll and testing rules come first, and the cost belongs in the budget. Owners of S corporations, partnerships and professional firms should expect to sponsor it for staff rather than use it for their own children. At Proseer, we help business owners in Fort Lauderdale and across South Florida, including law firms, weigh benefits like this against their budget and tax picture. Contact us before you add it to your 2027 benefits.
