Employer contributions to Trump Accounts become legal on July 4, 2026 — one year to the day after the One Big Beautiful Bill Act created the new children’s savings accounts. For small business owners, the launch opens a question worth real money: can your business fund your own kids’ accounts with pre-tax dollars?

The answer appears to be yes for many owners, but the mechanics matter. The tax break runs through new Internal Revenue Code Section 128, which lets an employer contribute up to $2,500 per year to the Trump Account of an employee or an employee’s dependent without the amount counting as taxable income to the employee.

For a solopreneur who is also an employee of their own company, that can mean a business deduction on one side and no income tax on the other — a combination that is hard to find elsewhere in the code.

But the provision comes with paperwork requirements, contribution caps, and several unresolved questions the IRS has not yet answered. Here is what the rules require, where the opportunity sits for owner-operators, and the mistakes that could undo the benefit.

How The Employer Contribution Works

Trump Accounts, created under Tax Code Section 530A, are a special type of traditional IRA for children under 18 who have a Social Security number. A parent or guardian opens the account by filing Form 4547 or using the government’s online application at trumpaccounts.gov, and the funds must be invested in low-cost mutual funds or ETFs that track the S&P 500 or another index made up primarily of U.S. equities. Money cannot be withdrawn until January 1 of the year the child turns 18, at which point the account converts to standard traditional IRA treatment.

Total contributions from all sources are capped at $5,000 per year, indexed for inflation after 2027, according to IRS guidance in Notice 2025-68. Children born between January 1, 2025 and December 31, 2028 also receive a one-time $1,000 federal pilot program contribution, which does not count against the cap.

The employer piece sits inside that framework. Under Section 128, an employer may contribute up to $2,500 per year (also indexed after 2027) to the Trump Account of an employee or the employee’s dependent.

Two details matter here:

1. The $2,500 limit applies per employee, not per child, so an employee with three kids still tops out at $2,500 in total employer money.
2. The employer contribution counts against the $5,000 aggregate cap per child, so a family planning to contribute on its own needs to coordinate the two.

The contribution is excluded from the employee’s gross income and, according to an analysis by Grant Thornton’s Washington National Tax Office, is a deductible business expense for the employer. Draft IRS forms show the amounts reported on the W-2 in Box 12 under new code “TA.”

What Businesses Must Do To Qualify

The income exclusion only applies if contributions are made under a Trump Account Contribution Program (TACP) — a separate written plan the statute requires to exist for the exclusive benefit of employees. Section 128 borrows most of its program rules from the dependent care assistance program (DCAP) requirements under Section 129(d), including:

Nondiscrimination. The program cannot favor highly compensated employees or their dependents in eligibility or benefits. If you have a team, you cannot quietly set up a program that covers only your own children.

Notice. Employees must receive reasonable notification that the program exists and what its terms are.

Annual statements. By January 31 each year, employees must receive a written statement showing what the employer contributed for the prior year.

One notable difference from DCAPs: Section 128 cross-references paragraphs (2), (3), (6), (7), and (8) of Section 129(d), but not paragraph (4) — the rule that limits owners holding more than 5% of a business to 25% of total DCAP benefits.

That owner-concentration test is what makes dependent care FSAs nearly useless for owner-heavy small businesses (like solopreneurs). Its absence from Section 128 is a meaningful opening for small firms, though benefits attorneys at Verrill note that regulations addressing nondiscrimination testing are still coming, and the proposed regulations issued in March 2026 reserved the employer-program sections for future guidance.

There is also good news on the compliance front. On June 17, 2026, the Department of Labor issued Technical Release 2026-02, taking the position that Trump Accounts and TACPs generally are not ERISA pension plans when they benefit employees’ dependents.

Programs that contribute to a teenage employee’s own account can also avoid ERISA, provided participation is voluntary, the employer stays out of investment decisions, and the employer does not hold the program out as an employee benefit plan.

Mistakes To Avoid

A few mistakes could turn the benefit into a problem. Do not contribute before July 4, 2026 — earlier contributions are not permitted.

Do not skip the written plan document, the employee notice, or the January 31 statement. Without a qualifying TACP, the exclusion does not apply. 

Do not exceed the caps: over-contributions to IRAs generally trigger a 6% excise tax, and the $2,500 employer amount counts toward the child’s $5,000 total. If both parents’ employers offer contributions, know that the IRS has not yet clarified how the limits coordinate, so proceed carefully. 

Do not assume payroll tax treatment – guidance to date addresses the income tax exclusion, and employers should confirm FICA handling with their payroll provider or CPA. 

And remember the back end: employer contributions come out as ordinary income when the child eventually withdraws them, which makes the account a tax-deferral play, not a Roth. One way around this is to eventually convert the Trump account to a Roth IRA, but that also takes planning.

What This Means For Small Business Owners And Their Families

For small business owners that are corporations (like S-Corp businesses), this could be a new possible way to save for your family tax-deferred.

An S corp owner who pays themselves a salary is an employee of the corporation, which means the business can adopt a TACP and contribute $2,500 per year toward the owner’s dependent children — deductible to the business, income-tax-free to the owner. With no other employees, there is no one the program could discriminate against, similar to the logic behind solo 401(k) plans. Owners should still document the written plan and confirm the approach with a tax professional, since the IRS has not issued final nondiscrimination rules.

Sole proprietors and partners without W-2 wages are in murkier territory. The DCAP statute explicitly treats self-employed individuals as employees for program purposes while Section 128 contains no parallel provision. Until the IRS says otherwise, an unincorporated solopreneur should not assume they can pay themselves an “employer” contribution.

A few other angles worth knowing. A business that employs the owner’s spouse as a bona fide employee could contribute toward the couple’s children as the spouse’s dependents. And a business that legitimately employs the owner’s teenager can contribute up to $2,500 directly to that teen employee’s own Trump Account, though not through salary reduction under a cafeteria plan, which is only permitted for contributions to a dependent’s account.

For hiring, the benefit also works as a recruiting tool: a $2,500 pre-tax family benefit can stand out for small employers competing for parents in the workforce.

Don’t Miss These Other Stories: