Blog
We keep you up to date on the latest tax changes and news in the industry.
Trump Account Employer Contributions: A Section 128 Guide for Business Owners
Quick answer: For 2026, an employer may contribute up to $2,500 per employee through a qualifying written Section 128 program. The limit is not per child, and owner treatment requires separate review.
An employer may contribute to the Trump Account of an employee or an employee’s dependent. For 2026, up to $2,500 per employee may be excluded from the employee’s federal gross income if the payment is made through a qualifying written Section 128 program.
The contribution is not as simple as sending money to the account.
Before funding, the employer should adopt a separate written program, test the program for nondiscrimination, notify eligible employees, confirm the Trump Account and trustee process, coordinate payroll reporting and track the applicable annual contribution limits.
September 10, 2026 update: IRS proposed regulations now address owner eligibility. They would exclude more-than-2% S corporation shareholders from participating as employees. These rules are proposed, not final; review current applicability and reliance provisions before implementation.
Who should pay attention to Section 128?
This new benefit may be relevant to:
Small and midsize employers looking for a family-focused employee benefit
Business owners who want a predictable employer-funded contribution
Companies competing for employees without adding another complicated retirement plan
Payroll, accounting and benefits teams responsible for implementation
S corporations and other closely held businesses that need to separate owner treatment from employee treatment
The benefit may help an employer support employees and their families, but it should be treated as a formal employee-benefit program—not an informal payment.
How much may an employer contribute?
For 2026, the Section 128 federal income exclusion is limited to $2,500 per employee.
That limit is per employee, not per child and not per Trump Account.
For example, assume an employee has two dependents with Trump Accounts. The employer cannot contribute $2,500 to each account and exclude $5,000 from that employee’s income. The total Section 128 exclusion for that employee is limited to $2,500 for the year.
The $2,500 limit is scheduled for cost-of-living adjustments after 2027.
Do not confuse the $2,500 and $5,000 limits
Two different limits must be tracked:
The employer limit: Up to $2,500 per employee may qualify for the Section 128 exclusion.
The account limit: Section 128 employer contributions count toward the Trump Account beneficiary’s applicable $5,000 annual contribution limit.
The $5,000 limit generally applies to the total of Section 128 employer contributions and other non-exempt contributions made during the beneficiary’s growth period. Certain contributions, including the federal pilot contribution, qualified general contributions and qualified rollover contributions, are treated differently.
Employers should not rely only on their payroll records. They should coordinate with the employee and the account trustee or custodian so the deposit does not create an excess contribution.
A separate written Section 128 program is required
The employer contribution must be made under a separate written Trump Account contribution program.
Section 128 requires the program to meet rules similar to selected requirements under Section 129(d). Those rules include:
Contributions and benefits may not discriminate in favor of highly compensated employees or their dependents.
Eligibility classifications may not favor highly compensated employees or their dependents.
Eligible employees must receive reasonable notice about the program and its terms.
Required employee statements must be provided.
The program must satisfy the applicable average-benefit requirement.
The written program should also state:
The effective date
The employees who may participate
The employer contribution amount or formula
Whether contributions may go to the employee’s Trump Account, a dependent’s Trump Account or both
The funding schedule
Employee election and account-verification procedures
Correction procedures
Amendment and termination rights
Recordkeeping responsibilities
The employer should approve and sign the program before the first qualifying contribution is made.
Seven steps before the first contribution
1. Set the benefit design and budget
Choose the employer-funded amount or formula. Decide whether the benefit will be a fixed amount, a matching formula or another uniform design that can satisfy the applicable rules.
Estimate the total annual cost before announcing the program.
2. Define eligibility and test the design
Identify the group of employees that will be covered. Review the eligibility classification and expected benefits for possible discrimination in favor of highly compensated employees.
Do not assume that a benefit limited to owners, executives or selected employees will qualify.
3. Adopt the written program
Prepare, approve and sign the separate Section 128 program. Keep the signed program and any amendments with the employer’s permanent benefit records.
4. Confirm the Trump Accounts and trustee process
Confirm that each designated Trump Account is established and that the trustee or custodian can accept a Section 128 employer contribution.
The employer should identify the deposit to the trustee as a Section 128 employer contribution and retain proof of the instruction and payment.
5. Notify employees and collect elections
Give eligible employees a plain-language notice explaining the program, contribution terms, account requirements and deadlines.
Collect the information needed to direct the contribution to the correct Trump Account. Use a secure process and do not request more personal information than the employer needs.
6. Coordinate payroll and W-2 reporting
Create a separate payroll or general-ledger code for qualifying Section 128 contributions.
The 2026 Form W-2 instructions provide Box 12, Code TA for employer contributions made under a Section 128 Trump Account contribution program.
Code TA should not be used automatically for a taxable owner bonus or another payment that is not a qualifying Section 128 employer contribution.
7. Complete a final go-live review
Before funds move, confirm that:
The written program is signed and effective.
Eligibility and benefit testing has been reviewed.
The employee notice and election process is complete.
The Trump Account and trustee instructions are confirmed.
The employer has a process to track both annual limits.
Payroll and W-2 reporting are ready.
Owner and shareholder issues have been reviewed separately.
How does Section 128 apply to a one-owner S corporation?
Owner eligibility requires separate review under Section 1372 and the new proposed Section 128 regulations.
Section 128 excludes qualifying employer contributions from an employee’s federal gross income. However, Internal Revenue Code Section 1372 generally treats a shareholder who owns more than 2% of an S corporation as a partner—not an employee—for fringe-benefit purposes.
The proposed rules would exclude partners, sole proprietors, and more-than-2% S corporation shareholders from eligible employee status, while allowing a business owner to maintain a program for eligible employees. Do not present the proposal as a final regulation.
A conservative planning approach is:
Do not assume that a direct S corporation payment for the owner’s Trump Account or a dependent’s Trump Account is automatically tax-free.
If the owner wants to fund the account, consider whether the corporation should instead pay additional taxable compensation.
Report taxable compensation as regular W-2 wages, subject to the applicable payroll-tax rules.
The owner may then make a personal contribution, subject to the Trump Account’s applicable annual limit.
Do not automatically use W-2 Code TA for a taxable owner bonus.
An S corporation with non-owner employees may still consider a separate Section 128 program for eligible employees. The owner-shareholder question should be reviewed separately.
Common implementation mistakes
Employers should avoid these mistakes:
Funding the account before adopting the written program
Treating the $2,500 limit as a per-child limit
Failing to coordinate with the account trustee
Ignoring contributions made by other sources when monitoring the $5,000 account limit
Offering the benefit only to favored employees without testing the design
Using W-2 Code TA for a payment that does not qualify under Section 128
Treating a more-than-2% S corporation shareholder as an ordinary employee without review
Building the paperwork after the money has already moved
Employer implementation checklist
Before funding, the employer file should contain:
Signed Section 128 program
Benefit design and budget approval
Eligibility and nondiscrimination support
Employee notice and delivery record
Employee election and account instructions
Trustee or custodian confirmation
Contribution authorization and deposit records
Payroll reconciliation and W-2 Code TA support
Tracking for the $2,500 employer limit
Coordination for the applicable $5,000 account limit
Separate owner and shareholder review
Final compliance sign-off
Practical resources: Request the Trump Account Employer Implementation Checklist or request the sample written Section 128 program.
Frequently asked questions
Is the employer limit $2,500 per child?
No. For 2026, the Section 128 exclusion is limited to $2,500 per employee, not $2,500 for each child or dependent.
Does the employer contribution count toward the $5,000 Trump Account limit?
Yes. A Section 128 employer contribution counts toward the beneficiary’s applicable $5,000 annual contribution limit.
Can the employer make the contribution without a written program?
A contribution must be made under a qualifying separate written Section 128 program to receive the Section 128 exclusion.
Where is the contribution reported on Form W-2?
The 2026 Form W-2 instructions provide Box 12, Code TA for qualifying Section 128 employer contributions.
Can a one-owner S corporation make a tax-free contribution for the owner’s dependent?
Do not assume the answer is yes. Section 1372 generally treats a more-than-2% S corporation shareholder as a partner for fringe-benefit purposes, and the proposed Section 128 rules would exclude these shareholders from eligible employee status. The proposal is not a final regulation.
Can an employer begin making contributions now?
Trump Account contributions could not be made before July 4, 2026. An employer should also complete its written program and implementation process before making a Section 128 contribution.
When should an employer talk to a CPA?
The employer should obtain advice before funding if:
The company is closely held.
Owners or family members may participate.
The business is an S corporation.
The program will cover only selected employees.
Payroll or the trustee is unsure how to classify the payment.
The employer cannot confirm the beneficiary’s remaining annual contribution capacity.
A contribution has already been made without a written program.
JH Group CPA helps business owners review the tax, payroll, ownership and implementation issues before money moves.
Request an Intro Call
If your company is considering a Section 128 Trump Account contribution program, request an intro call with JH Group CPA. We can help identify the decisions that should be resolved before the company adopts the program or makes the first contribution.
Please do not send confidential tax or account documents by email. JH Group CPA will provide a secure upload process when documents are needed.
JH Group CPA, A Professional Corporation Alhambra and Irvine, California 626-943-2888 info@jhgroupcpa.com
Related JH planning resources
Coordinate this benefit with business-owner tax planning and, where applicable, S corporation tax planning.
Updated September 10, 2026: owner-guidance status and related service links. Original publication date retained.
Official sources
IRS Bulletin 2026-37: proposed employer-contribution regulations, REG-101355-26
This article is for general educational purposes and is not tax, legal, payroll or investment advice for any specific employer or taxpayer. Section 128 guidance is still developing. Confirm current federal and state rules before implementing a program or moving funds.
Sign up for our newsletter.
Each month, we will send you a roundup of our latest blog content covering the tax and bookkeeping tips & insights you need to know.
We care about the protection of your data.