Trump Accounts for Business Owners: Funding Your Children’s Future Through Payroll 

Almost everything written about Trump Accounts is addressed to parents. Open an account, get $1,000 from the Treasury, contribute up to $5,000 a year, watch it compound. Useful, as far as it goes. 

Almost nothing is addressed to the person who signs payroll. And that is where the more interesting decision sits, because an employer can put money into these accounts with dollars that are deductible to the business and never taxed to the employee — which is a better deal, on the way in, than any parent can arrange for themselves. 

Treasury and the IRS issued two sets of proposed regulations in the week of 20 August 2026: one on employer contributions, one on which investments the accounts may hold. Comments on the employer rules close 25 September, with a public hearing on 15 October. So this is a decision you can make early, cheaply, and before your competitors have heard of it. 

Here is what it actually involves, and — more usefully — how it stacks up against what you are probably already doing. 

What a Trump Account is, briefly 

A Trump Account is a tax-deferred investment account for a child. The mechanics, as they currently stand: 

• Who can have one: any child with a Social Security number, provided the account is opened before the calendar year in which the child turns 18. 

• The federal contribution: a one-time $1,000 from the Treasury for eligible children born between 2025 and 2028, elected on Form 4547 through the IRS Individual Online Account. 

• Annual contributions: up to $5,000 a year from all authorized sources combined — family and employer together, not each. 

• What it can hold: only a mutual fund or ETF that tracks an index of primarily U.S. companies, such as the S&P 500, uses no leverage, and charges annual fees and expenses of no more than 0.1%. If nobody chooses, the trustee picks an eligible default. 

• Access: generally no withdrawals before the year the child turns 18. After that the account is treated like a traditional IRA, with similar tax rules. 

That last point is the one to hold onto, because it determines almost everything that follows. Money goes in without being taxed, grows without being taxed, and is taxed as ordinary income when it comes out. In tax character, a Trump Account is a small traditional retirement account with a lower age limit. 

The employer piece 

An employer may contribute up to $2,500 a year to the Trump Account of an employee, or of an employee’s dependent. Those contributions are generally deductible by the business and excluded from the employee’s taxable income. 

Read that twice, because it is unusual. Ordinarily, getting $2,500 into a child’s investment account means someone pays tax on it first — you take a distribution, or you pay the employee a wage, and the account gets funded with what survives. Here nobody pays tax on the way in. The business deducts it and the employee never sees it as income. 

The employer contribution counts against the same $5,000 annual cap, so it is not stacked on top of what a family can do. It is a cheaper way to fill part of the same bucket. 

The catch a business owner needs to hear first 

This is not a mechanism for quietly routing $2,500 to your own child. 

To make employer contributions, you have to maintain a separate written plan for the exclusive benefit of employees, and the proposed rules are explicit that eligibility, contributions and benefits must not discriminate in favor of highly compensated employees or their dependents. You are the highly compensated employee. A plan that funds the owner’s children and nobody else’s is exactly what those rules exist to prevent. 

Which means the real question is not “should I do this for my kid?” It is “am I willing to do this for everyone’s kids?” And the answer depends almost entirely on how many people you employ. 

If you have no employees besides yourself and family 

This is close to free. There is very little to discriminate against, the plan document is short, and you have found a way to move $2,500 a year into your child’s account with pre-tax dollars. Do it. 

If you have a handful of employees 

Sizeable but manageable. Five employees with children is $12,500 a year if everyone participates. Compare it honestly against what else that money could buy in the benefits budget — see below. 

If you have thirty employees 

Now it is a real benefits line item, and it should be evaluated like one: against a retirement match, against health contributions, against wages. It may still win on recruiting. It should not be chosen by accident. 

How it compares to what you are probably already doing 

Most of our clients with children in the business are already paying them on payroll — reasonable wages for real work, which shifts income and, done properly, funds a Roth IRA in the child’s name. That is a well-established strategy and it is not going anywhere. 

The two are not competing for the same child. Here is the honest comparison: 

The important line in that table is the one about tax coming out. A Roth funded with a working child’s wages grows tax-free and comes out tax-free. A Trump Account grows tax-deferred and comes out taxable. On tax character alone, the Roth wins clearly. 

What the Trump Account has that the Roth does not: it works for a child who is too young to legitimately work. There is no earned-income requirement, no defensible-wage question, no payroll to run. For a three-year-old, a Roth IRA is not an option and a Trump Account is. 

So the practical answer for most owner families is not either/or. Pay the teenager who genuinely works in the business, and fund her Roth. Use a Trump Account for the ones too young to work. And if you were going to do the employer plan anyway, the pre-tax funding is a real advantage for every family on your payroll, not just yours. 

Is this the best $2,500 you can spend per employee? 

Worth asking plainly, because a new benefit with a memorable name attracts more enthusiasm than its economics always justify. 

• Against a 401(k) match: identical tax character — deductible to you, untaxed to the employee, taxable on withdrawal. But a match goes to the employee’s own retirement, which most employees value more highly, and it can be tied to vesting. A match is usually the stronger retention tool. 

• Against an HSA contribution: an HSA is better on tax character, since qualified withdrawals come out tax-free rather than taxable. If your plan supports one, that dollar generally works harder. 

• Against a QSEHRA: different job entirely. A QSEHRA addresses a cost the employee is already carrying. A Trump Account addresses a goal they have not started on. Both are defensible; they are not substitutes. 

Where the Trump Account genuinely wins is differentiation. Almost nobody offers this yet. “We contribute to your children’s accounts” is a memorable line in a job posting in a way that “we match 3%” is not, and for a business competing for staff against larger employers with deeper benefits, being early on something distinctive has value that does not show up in a tax calculation. 

What is still proposed, and what could change 

Both regulation packages are proposals, not final rules. The employer-contribution comment period closes 25 September 2026, requests to speak at the hearing are due 13 October, and the hearing itself is 15 October. The comment period on eligible investments runs to 20 October. 

What is unlikely to move: the $2,500 employer limit, the $5,000 overall cap and the age-18 access rule are statutory. What could be refined in final regulations: the mechanics of the written plan, how nondiscrimination is tested in practice, and the definition of an eligible investment at the margins. 

That is a reasonable basis on which to plan, and a poor basis on which to promise anything to your staff in writing. Decide now; document once the rules are final. 

How to actually get started 

1. Confirm the accounts exist for the children you intend to fund. Parents open them through the IRS Individual Online Account using Form 4547, and that is also where the $1,000 federal contribution is elected for eligible children born 2025 through 2028. 

2. Count your exposure. Headcount with dependents, times $2,500, is your maximum annual cost if everyone participates. 

3. Compare it against your existing benefit dollars, honestly, using the list above. 

4. If you proceed, have a written plan drafted — a separate plan for the exclusive benefit of employees, satisfying the nondiscrimination requirements. 

5. Coordinate with payroll, since the contributions are excluded from employee income and need to be handled correctly at year end. 

6. Revisit after the October hearing, before you put anything in an employee handbook. 

Frequently asked questions 

Can I contribute to my own child’s account through my business? 

Yes, but only inside a plan that does not favor highly compensated employees or their dependents — and as the owner, that is you. If you have employees, the plan has to work for their children on comparable terms. 

Does the employer’s $2,500 reduce what we can contribute as parents? 

Yes. The $5,000 annual limit covers authorized contributions from individuals and employers combined, not separately. 

What if both parents work for employers that offer this? 

The overall $5,000 cap still governs the account, so the contributions have to be coordinated. The proposed regulations do not spell out the mechanics of two employers funding the same child’s account, and it is a question worth asking before you rely on the answer. 

Is the contribution taxable to my employee? 

No. Employer contributions are excluded from the employee’s taxable income and are generally deductible by the business. 

Can the money be used for college? 

The account becomes accessible in the year the child turns 18 and is then treated like a traditional IRA, so the money can be withdrawn and used for education, a first home, or anything else — subject to the tax rules that apply to traditional IRA distributions. It is not a dedicated education account, and it is not a substitute for a 529 if education is the actual goal. 

What can the account be invested in? 

Only a low-cost fund tracking an index of primarily U.S. companies — no leverage, and annual fees and expenses no greater than 0.1%. If no election is made, the trustee selects an eligible default. 

Where to start 

If you have young children and few employees, this is one of the cheapest good decisions available to you this year, and the plan document is a short piece of work. 

If you have real headcount, treat it as what it is: a benefits question with a tax-efficient answer, worth deciding on purpose before somebody in your industry starts advertising it. 

Not sure whether this belongs in your benefits mix? We will price it against everything else on your list. Call (844) 229-8936 or schedule a meeting. 

This article describes proposed Treasury regulations and statutory provisions as of August 2026. Proposed rules can change before they are finalized. Talk to a qualified advisor before establishing a plan or making contributions.