On July 4, 2026 — exactly one year after the One Big Beautiful Bill Act was signed — a new employer benefit went live. Under new Internal Revenue Code Section 128, a business can contribute up to $2,500 a year into a Trump Account for an employee or an employee’s dependent child. The business deducts it. The employee never pays tax on it.

If you’re an S-corp owner who pays yourself a W-2 salary and you have kids under 18, read that sentence again. Your business can fund your own children’s accounts with pre-tax dollars.

There’s a catch, and it’s a real one. I’ll get to it.

What the money actually does

The contribution is excluded from the employee’s gross income under Section 128. It shows up on the W-2 in Box 12 with code TA — informational only. It does not go into Box 1, Box 3, or Box 5. That means no federal income tax, no Social Security tax, no Medicare tax on it.

Meanwhile the business deducts it as a compensation expense.

Compare that to how you’d do it today. Say you want $2,500 in your daughter’s account and you’re an S-corp owner in the 24% federal bracket, roughly 6% New York, plus the Medicare portion on wages. To net $2,500 of take-home to hand over, you’re pulling roughly $3,700 out of the business in gross wages and watching about $1,200 evaporate on the way. Through a Section 128 program, the business writes $2,500 and $2,500 lands. The difference is a real, repeatable $1,200 a year per child, and it compounds for eighteen years.

A few limits to keep straight:

  • $2,500 is per employee, per year — not per child. Two kids means the $2,500 gets split, not doubled.
  • The amount is inside the $5,000 annual Trump Account contribution cap, not stacked on top of it. Employer money crowds out your own.
  • The $2,500 figure holds for 2026 and 2027, then gets indexed for inflation.
  • For every deposit, the employer has to affirmatively tell the account trustee this is an employer Trump Account contribution excludable from income. That flag is the whole mechanism. Miss it and it’s just taxable wages.

Here’s the catch

You cannot do this only for yourself.

Section 128 requires a written program, and the nondiscrimination rules are modeled on the Section 129 dependent care rules — the plan can’t be tilted in favor of highly compensated employees. Translation: if you have employees, and you set this up to fund your own kids, you’re going to have to make it available to theirs.

For a solo S-corp owner with no employees, that’s a non-issue and this is close to free money. For a shop with eight people, it isn’t. Eight employees at $2,500 is a $20,000 payroll line — which may be a perfectly good retention benefit, or may be more than you want to spend. That’s a business decision, not a tax one, and you should make it with your eyes open instead of finding out in March.

The written plan needs to spell out eligibility, the contribution amount or formula, timing, which accounts are available, and how you amend or end the thing. This is not a handshake.

Wondering whether a Section 128 program pencils out for your payroll — or whether you're small enough that it's a no-brainer? Book a 15-minute call and we'll do the headcount math before you commit to anything.

Who this is genuinely good for

The solo S-corp owner with young kids. No employees, no nondiscrimination problem, $2,500 a year moved from after-tax to pre-tax. This is the cleanest use of the provision that exists.

The husband-and-wife business. Same logic. If both of you are on payroll, look carefully at whether you get one $2,500 or two — the limit is per employee, and the answer depends on how your kids are treated as dependents of each of you. That’s a conversation, not a blog post.

The small employer already competing for people. A benefit that puts money in an employee’s child’s account is memorable in a way that another half-percent match is not. If you were going to raise pay anyway, this is a more tax-efficient way to deliver part of it.

Who it’s not for: a business with a lot of employees and thin margins, or an owner with no kids under 18 and no interest in funding anyone else’s.

Don’t confuse this with the other options

This is not a replacement for a 529. A 529 and a Trump Account do different jobs, and for pure education funding the 529 usually still wins on the tax-free-withdrawal side. If you haven’t looked at how Trump Accounts work from the saver’s side — the $5,000 cap, the age rules, what happens at 18 — start there, because the employer piece only makes sense once you understand the account.

And it’s a different animal from putting your kids on payroll. That strategy shifts income to a low bracket and requires real work performed. This one requires nothing from the child at all. In the right business, you can do both.

What to do now

Guidance on Section 128 program mechanics is still being written — the IRS has said more specific rules are coming. That’s not a reason to sit out 2026, but it is a reason to set this up deliberately rather than wiring money and hoping.

If you’re a solo owner with kids under 18, this is one of the few genuinely new tax breaks aimed squarely at people your size. Get the written plan drafted, tell your payroll provider it needs to report Box 12 code TA, and start the contributions.

If you have staff, run the headcount number first. Then decide.

Not sure whether your entity structure even supports this — or whether an S-corp election is the missing piece? Run your numbers on the LLC vs. S-Corp calculator, then schedule a call to talk through what a Section 128 program would look like for your payroll.

This post is for general informational purposes only and does not constitute tax, legal, or financial advice. Section 128 employer Trump Account contributions are brand-new law effective July 4, 2026, and further IRS guidance on program requirements is expected. Do not establish a program without professional review. Consult a qualified tax professional. Geiger Tax & Accounting is based in Amityville, NY and serves clients nationwide — (631) 532-5622 · info@geigertax.com.