Your Boss Can Fund Your Kid's Account, Up to $2,500 a Year

Open enrollment brings a new slide from HR: the company will add money to your children's Trump accounts. That sounds like free money, and for many families it is the cheapest way to fund an account. Two details decide how much it helps. This chapter covers both, plus the rules that are still unsettled.

How much can an employer give?

An employer can give up to $2,500 a year per employee. The tax code puts it this way in section 128. The money can go to the employee's own account or to a dependent's account. Starting in 2028 the limit rises with inflation.

The words "per employee" matter. Three children do not mean $7,500. They mean one $2,500 limit, divided any way you like.

Nothing forces an employer to offer this. Many will not, at least at first. Ask your benefits team whether a program exists.

Does employer money use up the $5,000 limit?

Yes. A Trump account can take $5,000 a year from everyone except the federal $1,000 deposit and a few special gifts. The IRS says employer money counts toward that $5,000. Our chapter on the $5,000 limit explains who else can give.

So when an employer adds $2,500, only $2,500 of room is left for parents, grandparents and friends combined.

How is employer money taxed going in?

Employer money under section 128 is left out of your income for income tax. The exclusion only works through an employer program that follows the rules in the next section.

The proposed rules say payroll taxes still apply to it. Payroll taxes are the Social Security and Medicare taxes taken from pay. The employer reports the amount on your W-2, in box 12 with code TA.

Here is a made-up example. You earn $80,000 and sit in a 22% income tax bracket. You ask to redirect $2,500 of your pay into your daughter's account.

Putting in $2,500 of your own after-tax money would cost you the full $2,500 of take-home pay. So the redirected route saves $550 now. Payroll taxes apply either way, so they do not change the comparison.

What do the proposed employer rules say?

Treasury proposed these rules in August 2026. Proposed means they can change. The points below come from the text of the proposal in the Federal Register, which a law-firm summary also matches:

• A written plan. The employer must set up a separate written plan for its employees.
• Fair to everyone. The plan cannot favor highly paid workers.
• Pay redirected before tax. If it runs through a payroll plan, the proposal says it works only for a dependent's account, not your own. You must be able to change your choice at least monthly.
• Self-employed owners. Sole proprietors and partners are not "employees" for this rule. They cannot use it for their own children.

The proposal says taxpayers may rely on it before it is final. Ask your employer which version of the rules it follows.

Is employer money taxed when it comes out?

Yes. This is the part many people miss. You got a tax break going in, so the IRS treats employer money as untaxed money. The IRS notice says it creates no basis. Basis is the part of an account you already paid tax on, and it comes out tax-free.

Employer money has no such part. After the growth years, all of it and everything it earned is taxed as ordinary income.

Here is a made-up comparison. Both families pay the same $1,950 of take-home pay. Money grows 6% a year for 18 years. The child pays a made-up 12% tax on the way out.

The employer route still comes out ahead in this example. It is a made-up case, and a higher tax rate on the way out would shrink the gap. Our chapter on taxes on withdrawals shows how much the rate matters.

What should you do now?

1. Ask HR whether the company has a Trump account program, and which rules it follows.
2. If it does, decide how to split the $2,500 among your children.
3. Tell relatives how much the employer adds, so the family stays under $5,000.
4. Keep a record of what you put in yourself. Your own after-tax money is the only part that comes out tax-free.

Limits of this chapter.

• The employer rules are proposed, not final. They were read in the Federal Register text of the August 11, 2026 proposal and may change.
• The wages, tax rates and growth rate in the examples are made up.
• This is general information, not tax advice. Ask a tax professional about your own situation.