Employer contributions to Trump accounts let a company pay up to $2,500 a year into the Trump account of an employee or an employee's dependent, and Section 128 keeps that amount out of the employee's taxable income. The money must flow through a separate written plan that passes nondiscrimination tests, it can start no earlier than July 4, 2026, it counts toward the account's $5,000 annual cap, and it is reported on Form W-2 in box 12 with code TA.
This guide covers employer contributions to Trump accounts from the payroll and plan design side: the statute, the proposed regulations published in August 2026, and the parts still pending as of October 2026. For the account itself (who can open one, how the money is invested and when it can be withdrawn), see our guide to Trump account rules for families.
Section 128 was added by the One Big Beautiful Bill Act (Public Law 119-21) and applies to taxable years beginning after December 31, 2025. The core rule in 26 U.S.C. 128 is short: "Gross income of an employee does not include amounts paid by the employer as a contribution to the Trump account of such employee or of any dependent of such employee if the amounts are paid or incurred pursuant to a program which is described in subsection (c)."
Three features shape every program:
Section 128(b)(1) says the excluded amount "with respect to any employee shall not exceed $2,500." The figure is indexed for taxable years beginning after 2027, using a cost-of-living adjustment with 2026 as the base year, rounded down to the next lowest multiple of $100. The August 2026 proposed regulations confirm the limit "is $2,500 for 2026 and 2027".
The cap is per employee, not per child. IRS Notice 2025-68 gives the example directly: if an employee has two or more children with Trump accounts, an employer "may only contribute up to $2,500 in the aggregate for 2026 to those Trump accounts." A program may let the employee split that amount among several children's accounts.
The limit also follows the employee across employers. If one person works for two unrelated employers that each contribute $2,500, both programs stay compliant if each plan caps contributions at the Section 128 limit, but the employee must include the extra $2,500 in gross income on their own return. When two spouses each work for an employer with a program, each spouse has a separate $2,500 exclusion, even for the same child.
Under Section 128(c), a Trump account contribution program is "a separate written plan of an employer for the exclusive benefit of his employees" that meets requirements similar to paragraphs (2), (3), (6), (7) and (8) of Section 129(d), the dependent care assistance rules. Those paragraphs cover discrimination, eligibility, notification, the year-end statement and the 55% average benefits test. The 25% owner concentration rule in Section 129(d)(4) is not carried over.
The proposed regulations (REG-101355-26, 91 FR 51611, published in the Federal Register on August 11, 2026 and still pending as of October 2026) say the written plan must specify:
The employer must follow those terms in operation and give eligible employees "reasonable notification of the availability and terms" of the program.
Three nondiscrimination tests apply:
Employees who have not both reached age 21 and completed one year of service, and certain union employees, are left out of the eligibility and average benefits tests. If a program fails, NHCEs keep the exclusion and only HCEs lose it; an average benefits failure can be corrected by adding the excess to affected HCEs' income by the Form W-2 deadline.
The proposed regulations use this illustration of the average benefits test. Eleven HCEs each elect $2,500, while seven NHCEs elect amounts totaling $9,000:
| Group | Employees with benefits | Total benefits | Average |
|---|---|---|---|
| HCEs | 11 | $27,500 | $2,500.00 |
| NHCEs | 7 | $9,000 | $1,285.71 |
| NHCE average as % of HCE average | 51.4% (fails the 55% test) |
Employers that already document a plan for Section 127 educational assistance will recognize the format.
Section 530A says a Trump account cannot accept contributions "before the date that is 12 months after the date of the enactment of this section". The law was enacted July 4, 2025, so the first permitted contribution date is July 4, 2026. The IRS 2026 Form W-2 instructions state: "Beginning July 4, 2026, employers may contribute up to $2,500 a year".
Payments can only go to an account still in its growth period, which ends with the year before the child turns 18. Under the proposed regulations, an employer may rely on a written employee certification of the beneficiary's relationship and date of birth, but it may not rely on that alone to confirm the account is a valid Trump account. It must use a method "reasonably designed to verify" the account through the trustee, payroll processor or another service provider. A program also cannot limit contributions to accounts held by particular trustees.
When it pays, the employer must tell the trustee the amount is a Section 128 contribution. If an amount later turns out not to qualify, the employer sends a corrective notice to the trustee, and 21 calendar days after that determination is treated as a reasonable period.
Under 26 U.S.C. 530A, contributions to a Trump account for a calendar year are capped at $5,000, indexed after 2027. Exempt contributions (qualified rollovers, qualified general contributions and the Section 6434 pilot program deposit) do not count. Section 128 employer contributions do count.
Employers do not police the account-level cap. The proposed regulations say the employer "has no obligation with respect to compliance with the section 530A(c)(2) limit." As of October 2026, Treasury and the IRS have only said they intend to propose that when combined contributions exceed $5,000, the excess is treated as coming first from other sources such as parents or relatives before Section 128 money.
Section 128 contributions also differ from family contributions on basis. Under Section 530A(d)(2), excluded employer contributions are not part of the account's investment in the contract, so they are taxed when eventually withdrawn.
Section 6434 provides a $1,000 Treasury deposit for eligible U.S. citizen children born after December 31, 2024 and before January 1, 2029. That deposit is exempt from the $5,000 cap.
The August 2026 proposed regulations note that a number of major employers have announced plans to match the government's $1,000 deposits. A match paid through a qualifying program is excludable, and it counts toward the employee's $2,500 Section 128 limit. The proposal also adds a pilot match safe harbor, still pending as of October 2026: if the match is offered on the same terms to all non-excluded employees with pilot-eligible children, it is disregarded for the contributions and benefits test and the 55% average benefits test. It still counts for the eligibility test.
Notice 2025-68 and the proposed regulations allow a program to run through Section 125 salary reduction when the money goes to a dependent's Trump account. Salary reduction is not allowed for a contribution to the employee's own account, because that would be deferred compensation under Section 125(d)(2)(A). The cafeteria plan must describe the benefit and let participants change or revoke elections prospectively at least monthly. Employers that already run a plan can review our guide to Section 125 cafeteria plans for employers before adding this option.
Section 128 is an income tax exclusion only. The proposed regulations, pending as of October 2026, state that excludable contributions "have no corresponding exclusion from the definitions of wages under section 3121 (FICA) and section 3306 (FUTA)". They remain subject to Social Security, Medicare and FUTA tax unless another exclusion applies, but excludable amounts are not subject to federal income tax withholding. Any employer payment outside the program, or above the limit, is ordinary wages subject to withholding.
For reporting, the 2026 W-2 instructions add "New box 12, code TA" for contributions paid under a Section 128 program. Reporting the amount in box 12 with code TA can satisfy the written statement requirement borrowed from Section 129(d)(7). Our walkthrough of the 2026 Form W-2 redesign covers the other new codes, and Publication 15-A repeats the program rules for employers. Add the code TA mapping to your year-end payroll compliance checklist before W-2s go out in January 2027.
State income tax treatment depends on whether each state follows the federal exclusion, a point covered in our piece on state conformity to OBBBA.
Dana's employer adopts a written Trump account contribution program for the 2026 calendar plan year. It pays a $1,000 pilot match for employees whose children received the Treasury deposit and lets employees add salary reduction contributions for dependents, capped at $2,500 per employee in total. Dana has a baby born in 2026 and a child born in 2020, and she is in the 22% federal income tax bracket.
| Item | Baby (born 2026) | Older child (born 2020) |
|---|---|---|
| Treasury pilot deposit (exempt from cap) | $1,000 | $0 |
| Employer pilot match (Section 128) | $1,000 | $0 |
| Dana's salary reduction (Section 128) | $0 | $1,500 |
| Family contributions | $3,000 | $3,500 |
| Counted toward the $5,000 cap | $4,000 | $5,000 |
| Remaining room under the cap | $1,000 | $0 |
| Basis (investment in the contract) | $3,000 | $3,500 |
Dana's Section 128 total is $1,000 + $1,500 = $2,500, exactly at the limit, so her W-2 shows $2,500 in box 12 with code TA. At a 22% rate, the exclusion keeps $550 of federal income tax off her return. FICA still applies: at 6.2% Social Security plus 1.45% Medicare, Dana owes $191.25 and the employer owes a matching $191.25. If the same $2,500 had reached Dana as ordinary cash wages instead (a $1,000 bonus plus the $1,500 she would otherwise have deferred), she would owe the $550 of income tax as well as the $191.25 of FICA, leaving $1,758.75 in hand. Through the program, the full $2,500 reaches the Trump accounts and Dana's only federal cost is the $191.25 of FICA.
As of October 2026, the employer rules are still proposed. Comments closed September 25, 2026, and a public hearing was scheduled for October 15, 2026. The rules would apply to plan years beginning on or after publication of final regulations, and taxpayers may rely on the proposed rules for plan years that begin before then.
Temporary and proposed regulations issued September 30, 2026 cover general account requirements and restate that Section 128 contributions count toward the $5,000 limit; as of October 2026, the ordering rule for excess contributions has not been proposed. As with other tax-free fringe benefits, employers should write the plan so it can be amended once final rules arrive.
How much can an employer contribute to an employee's Trump account tax-free? Up to $2,500 per employee per year can be excluded from income under Section 128 for 2026 and 2027. The amount is indexed for inflation for taxable years after 2027. The limit applies per employee across all of that employee's children and all employers.
Are employer contributions to Trump accounts subject to FICA? Yes, under the August 2026 proposed regulations, which are still pending as of October 2026. The Section 128 exclusion covers federal income tax only, so Social Security, Medicare and FUTA still apply unless another exclusion fits, while excludable amounts are not subject to federal income tax withholding.
Do employer contributions count toward the $5,000 Trump account limit? Yes. Section 128 contributions count toward the $5,000 annual cap per account, while the $1,000 pilot deposit, qualified general contributions and qualified rollovers do not. The employer is not responsible for tracking the account-level cap.
How are employer Trump account contributions reported on Form W-2? Employers report Section 128 contributions in box 12 with code TA, starting with 2026 Forms W-2. That entry can also satisfy the annual written statement requirement for the program.
Can S corporation owners receive Section 128 contributions? Under the proposed regulations pending as of October 2026, no. Only common-law employees qualify, so 2% S corporation shareholders, partners and sole proprietors are excluded, though their businesses can still offer a program to employees.
Madras Accountancy works with US CPA firms and their business clients on payroll processing, benefit reporting and year-end Form W-2 preparation, including setting up new reporting codes and reconciling benefit amounts to payroll records. To talk through how a Section 128 program would fit your payroll workflow, contact our team.
The section 4960 excise tax is 21% of nonprofit pay over $1M. From 2026 it covers all employees. See the medical carve-outs, Form 4720 and a worked example.
The paid family and medical leave tax credit is permanent from 2026. See the 12.5% to 25% rates, the premium option, the 6-month rule and how Form 8994 works.
Opportunity zones become permanent in 2027 under the One Big Beautiful Bill. See the new deferral, rural bonus, and the 2026 handoff.
