Money & Benefits · Explainer
Employer contributions to Trump accounts: the $2,500 rule
An employer can put up to $2,500 a year, tax-free, into an employee’s Trump account or a dependent’s. The IRS proposed the rules on August 11, 2026: the per-employee cap, the nondiscrimination test and why employers can already rely on it.
An employer can now put up to $2,500 a year into a worker's Trump account, or into a Trump account the employer opens for the worker's dependent, and the worker never pays income tax on that contribution. The IRS proposed the regulations that spell out how that works on August 11, 2026, and while the rule is not final, taxpayers may already rely on it.
What a Trump account is, briefly
The 2025 budget law, Public Law 119-21, created Trump accounts as a type of traditional IRA that exists for a beneficiary from the account's opening through December 31 of the year they turn 17, called the growth period. Section 6434 of the same law separately created a federal seed-deposit pilot program for Trump accounts; that pilot program is not what this proposed rule covers. This rule is about a different, employer-driven piece of the law: section 128, which lets an employer contribute to an employee's Trump account, or to the Trump account of an employee's dependent, without the employee owing income tax on the contribution.
The $2,500 limit is per employee, not per dependent
Section 128(b) caps the amount an employee can exclude from income at $2,500 a year, indexed for inflation starting in 2027. The IRS states plainly that this limit applies per employee, not per dependent: an employer contributing to the Trump accounts of an employee's three children still has one combined $2,500 ceiling to work with for that employee, not $2,500 for each child.
A Trump account contribution program has to be a separate written plan, and it has to meet nondiscrimination tests similar to the ones that already apply to dependent care assistance programs under section 129: it cannot favor highly compensated employees in either eligibility or the benefits it actually pays out.
One detail the guidance is specific about: a Trump account contribution program can run through a section 125 cafeteria plan, where an employee elects a salary reduction to fund it, only when the money goes into a dependent's Trump account. An employee cannot fund their own Trump account through a salary-reduction election under this program; contributions to an employee's own account have to come from the employer directly.
The nondiscrimination rules the proposal also touches
Because section 128 borrows its nondiscrimination framework from section 129, the same proposed regulations update the rules for dependent care assistance programs, the pre-tax benefit that pays for day care and similar costs. That benefit already excludes up to $7,500 a year from an employee's income ($3,750 if married filing separately), and it has to pass four tests: contributions and benefits cannot favor highly compensated employees; eligibility cannot be limited to a class that favors them; no more than 25 percent of the benefit can go to owners of more than 5 percent of the company; and the average benefit for employees who are not highly compensated has to be at least 55 percent of the average benefit those employees receive. A plan that fails these tests does not lose its tax exclusion for everyone, only for the highly compensated employees; other employees keep the exclusion.
When this takes effect, and why it matters now
The proposed regulations would formally apply to plan years beginning on or after the date final regulations are published. But the IRS says employers do not have to wait: taxpayers may rely on the proposed regulations for plan years that begin before that date. Since the underlying statute already applies to tax years beginning after December 31, 2025, an employer setting up a Trump account contribution program for this year has guidance to build the plan on now, even though the regulations are not final.
Have your say, or watch for it
The IRS is taking comments through September 25, 2026 and has scheduled a public hearing for October 15, 2026 at 10 a.m. Eastern; anyone who wants to speak has to submit a request and topic outline by September 25, and the hearing is cancelled if nobody asks to speak. Anyone who just wants to attend has until 5 p.m. Eastern on October 13.
This is one of several new pieces from the same 2025 law working through the same season: no tax on tips and overtime covers the deductions from sections 224 and 225 of the same act, and this page will be updated when the regulations are finalized.
What to do
- Ask your employer whether it offers, or plans to offer, a Trump account contribution program; the $2,500 exclusion only applies if the employer sets one up as a written plan. govinfo.gov
- If you want your own salary to fund a dependent’s Trump account through payroll, ask whether your employer’s plan runs through a section 125 cafeteria plan; the IRS allows that election only for a dependent’s account, not your own.
- To comment by September 25, 2026, or to request to speak at the October 15 hearing, use docket REG-101355-26 at regulations.gov. regulations.gov
Questions readers ask
- Can my employer contribute to my Trump account?
- Yes, up to $2,500 a year, tax-free to you, either to your own Trump account or to the Trump account of your dependent. The IRS proposed the regulations spelling out how on August 11, 2026; comments close September 25, and a public hearing is set for October 15, 2026.
- Is the $2,500 limit per child or per employee?
- Per employee. The IRS states the limit applies with respect to the employee, not per dependent, so an employer contributing to Trump accounts for more than one of an employee’s children still shares one $2,500 ceiling for that employee across all of them.
- Can I put my own salary into my Trump account tax-free through this program?
- Not into your own account. The proposed rule says a Trump account contribution program can be funded through a section 125 cafeteria plan salary-reduction election only when the money goes to a dependent’s Trump account, not the employee’s own. Contributions to an employee’s own Trump account under this program have to come from the employer directly.
- Is this the same as the government’s $1,000 Trump account deposit?
- No. Section 6434 of the same 2025 law created a separate federal pilot program that seeds Trump accounts for eligible children; this proposed rule is about section 128, a different provision that lets an employer voluntarily contribute to an employee’s or dependent’s Trump account and excludes that contribution from the employee’s income.
- Can my employer start doing this before the rule is final?
- The IRS says yes: taxpayers may rely on the proposed regulations for plan years beginning before final regulations are published. Since the underlying tax exclusion already applies to tax years beginning after December 31, 2025, an employer can set up a compliant program now using this guidance.
- What happens if my employer’s plan fails the nondiscrimination tests?
- The proposed rule applies nondiscrimination tests similar to those for dependent care assistance programs. If a plan fails them, the tax exclusion is lost only for highly compensated employees; employees who are not highly compensated keep their exclusion.
Mentioned:Internal Revenue Service
How we reported this
Built from 3 primary documents linked in the Source Card. Every number was copied from the document, not from another outlet.
This page reports figures and dates from the agency documents it cites. It is not tax, benefits or financial advice; the agency’s own notice controls if the two ever differ, and a decision about your own situation belongs with the agency or a qualified professional.
Written by Mirza Seraj Baig · Reviewed by Akbar Ali, Chartered Accountant (ICAI); reviewer, Money & Benefits and Settlements & Refunds desks on September 17, 2026 · Checked against the documents in the source card (editorial standards).