Trump account employer contributions: offering the $2,500 benefit

Trump account employer contributions of up to $2,500 a year are free of income tax, but not payroll tax. Here is what the proposed IRS rules would require.

Vishant Mehta, CPA, Ex-Big 4

Published October 11, 2026

Trump accounts
employee benefits
section 128
payroll tax
proposed regulations

Trump account employer contributions became possible on July 4, 2026. An employer can pay up to $2,500 a year per employee into the Trump accounts of the employee or the employee’s children. The employee owes no income tax on it if it goes through a separate written plan, called a Trump account contribution program.

The IRS rules for these plans are proposed, not final, and employers may rely on them now. Two points shape a plan for 2026. The $2,500 is free of income tax, but not of Social Security and Medicare tax. Money for 2026 must also reach the accounts by December 31, 2026.

Law	Section 128 of the tax code, enacted July 4, 2025
Income tax exclusion	Up to $2,500 per employee a year
Payroll taxes	Social Security, Medicare and FUTA still apply
Account limit	$5,000 a year, employer money included
Form W-2	Box 12, code TA
Status on October 9, 2026	IRS rules proposed, not final

How does an employer set up a Trump account contribution program, step by step?

An employer adopts a separate written plan for its employees and follows it.

Choose who is eligible. Use objective business criteria, such as job category or location. A list of named employees does not qualify.
Choose what you give. You can pay a flat amount, match Treasury’s $1,000 deposit, or let employees set aside their own pay for a child’s account.
Write the plan. It states who is eligible, the amounts, how employees name an account and how mistakes get corrected.
Tell employees. Every eligible employee must get reasonable notice of the plan and its terms.
Check each account. You may rely on an employee’s written statement of the child’s birth date and dependent status. You must still confirm, through the trustee or a payroll provider, that the account is a real Trump account.
Pay the trustee. Tell the trustee that each payment is a section 128 contribution. Withhold no income tax on it, but apply Social Security, Medicare and federal unemployment tax.
Report it. Show the amount in box 12 of Form W-2 with code TA, which also serves as the employee’s yearly statement.

Does the employer’s $2,500 count toward the $5,000 annual limit?

Yes. Employer contributions count toward the $5,000 a Trump account can receive each year. Only rollovers, Treasury’s $1,000 deposit and certain government and charity contributions sit outside it.

The $2,500 is one limit per employee, across all of the employee’s children and employers. Anything over it is taxable pay. Two parents who file jointly can each receive $2,500 for the same child, but that child’s account still stops at $5,000.

Is the $2,500 kept out of wages and payroll tax?

It is kept out of income tax, not payroll tax. The IRS says section 128 has no matching exclusion for Social Security, Medicare or federal unemployment tax, so FICA applies.

The income tax break is also a deferral. Employer contributions give the account no basis, so the child pays income tax on them when the money comes out as an adult.

What would the IRS proposed regulations require of employers?

They would require a written plan, account checks, notices to trustees and three fairness tests. The rules were proposed on August 11, 2026 and printed in Internal Revenue Bulletin 2026-37.

Owners cannot join. Partners, sole proprietors and 2% S corporation shareholders can sponsor a plan for their staff, but cannot receive contributions under it.
Three fairness tests. They follow the dependent care assistance program rules. Terms cannot favor highly compensated employees, eligibility must be nondiscriminatory, and other employees’ average benefits must reach 55% of theirs. A failure costs only the highly paid their exclusion.
A safe harbor for $1,000 matches. A match of Treasury’s deposit, offered on the same terms to all, is left out of two of the three tests.
No preferred trustee. A plan cannot limit contributions to accounts held at trustees the employer picks.
Salary reduction for children only. Employees may redirect pay through a cafeteria plan to a dependent’s account, but not to their own.
When it would apply. The rules would apply to plan years starting on or after the final rules are published. Until then, employers may rely on them.

The Labor Department said on June 17, 2026 that these programs generally are not ERISA pension plans.

Which employers have announced contributions so far?

Treasury says more than 50 companies have committed. On August 11, 2026, it published statements from these employers.

Employer	What it announced
Visa	Match Treasury’s $1,000 deposit
Franklin Templeton	Match the $1,000 for children of US employees
State Street	Match the $1,000 for children of active employees
Vanguard	From 2027, let employees direct $1,500 to an account
Chime	Offer a match, with the amount not stated

For families, a parent usually opens the account on Form 4547. Treasury adds $1,000 for eligible children born from 2025 through 2028.

When do the rules apply?

The law applies now, and the rules are still moving.

Date	What happens
July 4, 2026	First contributions allowed
October 15, 2026	Public hearing, by telephone only
December 31, 2026	Last day for 2026 contributions
2028	First year the $2,500 can rise with inflation

December 31 is a hard stop. An IRA contribution made by the April filing deadline can count for the year before, but the law turns that rule off for Trump accounts.

What should you do now?

Decide during open enrollment whether to offer a flat amount, a $1,000 match or salary reduction for 2026.
Budget for the employer’s share of Social Security and Medicare tax, up to 7.65%, on what you contribute.
Ask your payroll provider whether it can verify accounts, flag section 128 payments and report code TA.
Adopt the written plan before the first payment, and keep each employee’s certification.
Recheck this page once the rules are final. We will update it then.

To give each employee a CPA for questions like these, see our personal CPA employee benefit.