Your Employer Could Soon Contribute to Your Child’s Trump Account: New IRS Rules Explain How

The IRS and Treasury Department issued proposed regulations on August 11, 2026, giving employers a clear framework to contribute money directly to Trump Accounts for workers or their children. If your employer signs on, your child’s account could receive up to $2,500 a year from your workplace, largely free of federal income tax. Here is what the guidance says, what the rules require, and how this affects the average W-2 worker or gig worker right now.

What Is a Trump Account?

Trump Accounts are a new savings tool created under the One Big Beautiful Bill Act, allowing parents, guardians, and other authorized individuals to establish a new type of individual retirement account for their children. The account is for a child who has not turned age 18 before the end of the calendar year in which the election is made and has a valid Social Security number.

Unlike 529 college savings plans and other accounts designed for education or shorter-term expenses, these accounts are geared toward retirement and intended to help build long-term wealth. The accounts are held under a child’s name, with the parent or guardian serving as custodian, and are initially eligible for after-tax contributions of up to $5,000 a year until the year the child reaches age 18.

The program features a pilot program contribution of $1,000 for children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a valid Social Security number. Parents, guardians, and other authorized individuals can use IRS Individual Online Account to complete Form 4547, Trump Account Election(s), to open a Trump Account for a child with a Social Security number, if the election is made before the calendar year in which the child turns age 18.

What the New Proposed Rules Actually Say

The Treasury Department and the IRS issued proposed regulations (IR-2026-90, August 11, 2026) providing guidance to employers that choose to make contributions to Trump Accounts for employees or their dependents, and clarifying nondiscrimination requirements for employers offering Trump Account contribution programs and dependent care assistance programs.

The proposed rules provide the first comprehensive framework for employers that want to offer Trump Account Contribution Programs (TACPs) under IRC Section 128, including rules for employee and employer contributions, nondiscrimination testing, account verification, reporting, and investments. These rules were then published in full in the Internal Revenue Bulletin IRB 2026-37, dated September 8, 2026.

Under the proposed regulations, qualifying employer contributions to Trump Accounts generally may be excluded from an employee’s gross income up to $2,500 per calendar year, with the amount indexed for inflation after 2027. That is the headline number, but a few details matter a lot.

The $2,500 Limit Is Per Employee, Not Per Child

The exclusion is capped at $2,500 per employee for 2026 and 2027 and is subject to inflation adjustments after 2027. The limit applies to the employee, rather than to each dependent, meaning a worker with multiple children could not receive a separate $2,500 exclusion for each child’s account. That said, the employer can allocate the $2,500 cap among multiple children.

Employer Contributions Count Toward the Overall $5,000 Cap

Employer contributions also count toward the general $5,000 annual Trump Account limit under Section 530A. So if your employer puts in $2,500, the remaining room in the account for all other contributions combined is $2,500 for that year.

A Note on Payroll Taxes

Section 128 employer contributions are excluded from federal income tax but are subject to FICA and FUTA payroll taxes, a key distinction from most other cafeteria plan pre-tax benefits. In plain terms: your employer’s contribution will not show up in your taxable wages at year end, but it will still be subject to Social Security and Medicare taxes.

What Employers Have to Do to Qualify

Not every employer can just drop money into your child’s account and call it a day. The proposed rules set real requirements.

According to the IRS, a qualifying program would have to operate under a separate written plan specifying who is eligible, how much the employer will contribute, how employees designate accounts, and the procedures for required certifications, notices, reporting, and corrections.

Trump Account contribution programs are subject to nondiscrimination rules generally modeled on the dependent care assistance rules under Code Section 129. The program may not discriminate in favor of highly compensated employees or their dependents. In plain English: if your employer offers this benefit, it has to offer it fairly across the workforce, not just to executives or higher-paid staff.

Employers must also provide an annual written statement to employees by January 31 showing Section 128 contributions made during the prior calendar year. The 2026 General Instructions for Forms W-2 and W-3 provide that employers must report these contributions on Form W-2, using Box 12, Code TA.

The Gift Tax Question: Do You Need to File Form 709?

One source of confusion since Trump Accounts launched was whether individual contributions to a child’s account could trigger a gift tax return. The short answer for most families is no, but there is an important catch.

The IRS released Revenue Procedure 2026-25 on June 29, 2026. Rev. Proc. 2026-25 creates a safe harbor that allows taxpayers to treat contributions to these accounts as present interest gifts. Under this guidance, qualifying taxpayers will not be required to file Form 709 simply because they contributed to a Trump Account.

The safe harbor applies only if the contributor is an individual making cash contributions only, total gifts to each beneficiary including the Trump Account contribution do not exceed $19,000 for the year, no gift or GST tax liability is triggered after applying remaining lifetime exclusion, and no gift tax return is otherwise required or filed for any reason that year.

If any condition is not met, contributions revert to future-interest treatment and must be reported on Form 709. If you are already filing a gift tax return for other reasons, or if you are splitting gifts with a spouse, talk to a tax professional before contributing.

What This Means If You Already Have IRS Tax Problems

If you owe back taxes, are behind on filing, or are dealing with IRS collections, a new employer benefit does not make those problems go away. In fact, some taxpayers in collections worry that any income-related change, including new employer contributions appearing on their W-2, could complicate their situation. Here is what to keep in mind.

Employer contributions to a Trump Account are reported on your Form W-2 in Box 12 using Code TA. They are not included in your federal taxable wages, so they should not increase the income figure the IRS uses to calculate your tax liability for the year. However, if you are under an installment agreement or currently not collectible status, any change in your financial picture is worth reviewing with a professional to make sure your arrangement stays on track.

More broadly, if you have unfiled returns, unresolved IRS notices, or a balance you cannot pay, those issues deserve attention now, before new tax law changes make them more complicated. The IRS has multiple programs for people in exactly this situation, and depending on your circumstances, you may qualify for options that reduce or resolve what you owe. Clear Start Tax helps individuals and businesses work through the IRS resolution process, from getting back into filing compliance to exploring relief programs that may be available to you.

Key Dates and Next Steps to Know

• August 11, 2026: IRS issued proposed regulations (IR-2026-90) on employer Trump Account contributions and nondiscrimination rules.
• September 8, 2026: Proposed rules published in full in IRS Internal Revenue Bulletin 2026-37.
• October 15, 2026: A public hearing on the proposed regulations has been scheduled for October 15, 2026.
• July 4, 2026: Eligible accounts may begin accepting contributions starting July 4, 2026.
• These are proposed rules: The regulations remain proposed and are subject to change before being finalized. Treasury and the IRS are accepting public comments, and the proposed regulations would generally apply to plan years beginning on or after the date the final regulations are published.

If your employer announces a Trump Account contribution program, check whether a written plan is in place, confirm how it appears on your W-2, and verify that the nondiscrimination rules mean the benefit is available to you on the same terms as anyone else at your company. And if you have existing tax debt or unfiled returns, reach out to Clear Start Tax before year end. Getting your tax situation resolved before new filings land is always easier than dealing with compounding problems later.