What We Already Knew
At Brass Tax, we teach that every eligible individual should have a Trump Account set up on their behalf to access general fund contributions from the government, charities, or employers. These funding mechanisms effectively allowed the eligible individual to access “free money” they otherwise would not have received. So, while the distribution is generally treated as ordinary income when withdrawn, it was still better than nothing.
Another potentially useful strategy was to have friends and family members contribute to the account just before January 1 of the year the beneficiary turns 18 to effectuate a Roth IRA conversion once the growth period ended.
Outside these options, saving for a child in a 529 plan (for college-bound children) or even a custodial brokerage account posed a far better option, as they could be either excluded from income entirely or subject to the more beneficial capital gains rate.
What Changed
On August 11th, 2026, the IRS released new proposed regulations for employer contributions to Trump Accounts and offered some interesting insight into how taxpayers might better take advantage of these accounts. The proposed regulations primarily relate to the requirements for an employer to set up a Trump Account Contribution Program.
The IRS states that a Trump Account Contribution Program plan must be written by the employer and specify:
- The classes of employees eligible to participate
- The rules that govern employer contributions and whether contributions may be made via a section 125 cafeteria plan salary reduction arrangement
- The procedure for an employee to designate the trump account of the employee or dependent of the employee
- Documentation regarding reporting procedures
- The plan year
- The procedures for correcting administrative failures
Salary Reduction Contributions
Proposed Regulation §1.128-2(d)(7) provides that, if the employer plan allows, an employee can elect to apply a salary reduction to contributions into the employee’s dependent’s Trump Account (but not that of the employee). This effectively allows employees with access to such a plan to make a pre-tax contribution to a dependent’s Trump Account!
Employees should note that these salary-reduction contributions, while excludable from income, will still be subject to payroll tax.
A Sad Day for the Self-Employed
Many of our Tax Update Seminar attendees asked us whether a self-employed individual could make excludable employer contributions to their dependent child’s Trump Account. At the time, we stated that because of the way §128 (relating to the exclusion from income of employer-sponsored contributions to an employee’s dependent’s Trump Account) was written, we believed that 2% or more S corporation shareholders and partners of a partnership would be ineligible for such treatment. The IRS echoed our analysis in Proposed Regulation §1.128-1(b), stating that such self-employed individuals would be ineligible for this treatment. However, C corporation shareholder-employees are eligible for this treatment.
Adjusted Perspective
With the release of these proposed regulations, Trump Accounts are becoming a competitive choice for tax-advantaged savings. Unfortunately, this adjusted perspective will only help clients who do not own their own businesses and who have access to the Trump Account Contribution Program through their employer. Because preferred treatment will generally not apply to small-business owners, this article will not cover how an employer can set up this plan, but more information is available in the proposed regulations. We’ll discuss this issue in depth in our Update for 2026 Returns seminar.