Trump Accounts for Business Owners: Form 4547, the $1,000 Deposit and Employer Contributions

Trump Accounts are a new kind of savings account for children, created by the 2025 federal tax law. They opened for contributions on July 4, 2026. Most coverage is aimed at parents, but the law also created a new employee benefit: a business can put up to $2,500 a year into accounts for its employees and their kids, tax-free to the employee.

This guide covers how the accounts work, how to claim one, the rule that keeps S Corp owners from using the employer benefit for their own kids, and how California treats the accounts.

What a Trump Account is

A Trump Account is a traditional IRA set up for a child under 18. Until January 1 of the year the child turns 18, the money has to stay in low-cost index funds that track mostly U.S. companies, with annual fees of 0.1% or less, and it generally can't be withdrawn. After that, the normal traditional IRA rules apply, including the 10% additional tax on most withdrawals before age 59½ unless an exception fits.

So it's a long-term account. Think of it as a head start on retirement savings, with some flexibility once the child is an adult.

Opening an account: automatic enrollment and Form 4547

Beginning October 1, 2026, the Treasury automatically opened Trump Accounts for eligible children, meaning children with a Social Security number who won't turn 18 by the end of the year. If your child was enrolled this way, you don't need to file anything to open the account. You do need to claim and activate it before you can manage it. You do that through the official Trump Accounts app or website by verifying your identity and your authority over the account.

IRS Form 4547 is still used in two situations: to open an account for an eligible child who doesn't have one yet, and to elect the $1,000 pilot deposit. A parent, legal guardian, adult sibling or grandparent can file it, either with a tax return or online.

The $1,000 pilot deposit

The Treasury deposits a one-time $1,000 into the account of a child who was born in 2025 through 2028, is a U.S. citizen and has a Social Security number. The election is made on Form 4547 by the person who expects to claim the child as a qualifying child. Each child can get it only once, and it doesn't count toward the annual contribution limit.

If you have a child born in that window, this is the easy part. Automatic enrollment doesn't make the election for you, so file Form 4547 if you haven't already, and claim the account so you can manage it.

Trump Account contribution limits

Parents, relatives, the child and employers can contribute a combined $5,000 per child per year, with the limit adjusted for inflation after 2027. Three kinds of money don't count against that limit: the $1,000 pilot deposit, contributions from governments and charities made broadly to groups of children, and rollovers from another Trump Account.

Money parents and relatives put in isn't tax-deductible. It does create basis, so those dollars aren't taxed again when they come out. The benefit is tax-deferred growth on the earnings.

Employer contributions: a new benefit you can offer

Under Section 128 of the tax code, a business can contribute up to $2,500 a year per employee to Trump Accounts for the employee or the employee's children, and the employee doesn't pay federal income tax on it. A few details matter:

• The $2,500 limit is per employee, not per child. An employee with three kids can split it among their accounts, but the total stays at $2,500.
• Employer money counts toward each child's $5,000 annual limit.
• The business needs a separate written plan, and it has to meet nondiscrimination rules similar to those for dependent care assistance programs, so it can't favor owners and highly paid staff.
• Contributions are reported on the employee's W-2 in Box 12 with the new code TA.

The IRS issued proposed regulations in August 2026. They let employees fund a child's account with pre-tax pay through a cafeteria plan, and they include a safe harbor for employers that match the $1,000 pilot deposit. They aren't final, but businesses can rely on them until final rules are issued.

Can S Corp owners use it for their own kids?

Not under the current rules. The proposed regulations say that shareholders who own more than 2% of an S Corp aren't employees for this benefit, and neither are partners or sole proprietors. It's the same rule that makes S Corp owners' health insurance taxable wages instead of a tax-free benefit.

In practice, your S Corp can offer Trump Account contributions to your employees, but not tax-free contributions for your own children. You can still contribute personally, up to the $5,000 limit, with after-tax dollars. The final rules could change this, so it's worth checking back before you set anything up.

Are Trump Accounts taxed in California?

Not while the money stays in the account, starting with 2026. SB 180, signed in July 2026, adopts the Trump Account rules for California income tax. Earnings grow tax-deferred for California, as they do federally, and employer contributions under Section 128 are excluded from California income.

There are a few differences. One is that California's additional tax on certain distributions is 2.5% instead of the federal rate. Before SB 180, California didn't follow these rules at all, so older articles saying California taxes Trump Account earnings each year are out of date.

Is a Trump Account worth opening?

For a child born in 2025 through 2028, yes. The $1,000 deposit costs nothing but a form. Beyond that, compare it with what you're already using. A 529 plan is usually better for money meant for college, since qualified withdrawals are tax-free. If your child has earned income, for example from working in the family business, a custodial Roth IRA can beat both. A Trump Account fits best as long-term money you won't need before your child is an adult.

Frequently asked questions

Is the Trump Account legit?

Yes. It was created by federal law in 2025 and is run by the Treasury and the IRS. Stick to official sources such as IRS.gov, trumpaccounts.gov and the official Trump Accounts app rather than third-party links.

Can a child born before 2025 have a Trump Account?

Yes. Any child under 18 with a Social Security number can have one, and the Treasury began opening them automatically on October 1, 2026. Only children born in 2025 through 2028 get the $1,000 pilot deposit.

What is the $250 Trump Account deposit?

It's a private gift, not a government payment. Michael and Susan Dell pledged $250 per child for children born from 2016 through 2024 who live in a ZIP code with a median family income of about $117,300 or less. The original pledge used a $150,000 cutoff, and children who were enrolled, or had Form 4547 filed, before October 1, 2026, keep their eligibility under those earlier rules. The test uses median family income for the ZIP code, which is a different number from the median household income most online searches show.

When can the money be withdrawn?

Generally not until the year the child turns 18. After that, the account follows traditional IRA rules, so withdrawals are taxed and may face a 10% additional tax before age 59½ unless an exception applies.

Setting up a program for your employees

A Trump Account contribution program can be a low-cost benefit for employees with young kids, but it needs a written plan and correct W-2 reporting. API Accounting, Tax & Advisory can handle the payroll and W-2 side and walk you through the tax rules. Contact us to talk it through.

This article is general information based on federal law, IRS guidance and proposed regulations as of November 2026. Proposed rules can change before they're final. It isn't tax advice for your situation, so talk with a licensed professional before acting on it.