Implementation guidance for employer IRC §128 Trump account contribution programs and IRC §129 dependent care assistance programs (DCAPs) has been issued by the IRS. (REG-101355-26) The proposed regulations address changes made by OBBBA.
The maximum employer contribution exclusion is $2,500 per employee for the 2026 and 2027 tax years and is adjusted for inflation beginning with the 2028 taxable year. (IRC §128(b)) For a married couple, each spouse’s employer can contribute the maximum $2,500.
Key aspects of Trump account contribution programs are laid out in the proposed regulations and include:
- The maximum exclusion is per employee, not per child/dependent;
- If an individual is employed by two unrelated employers, each offering a Trump account contribution program, the maximum aggregate exclusion for the individual remains $2,500;
- Contributions exceeding the maximum exclusion amount are taxable compensation and are subject to FICA, FUTA, and RRTA withholding;
- Eligibility for the Trump account employer contribution exclusion is limited to common-law employees. Unlike the Dependent Care Assistance Program exclusion, self-employed individuals (including partners, sole proprietors, and 2% S corporation shareholders) are ineligible to participate in an employer’s Trump account contribution program, and any contributions to their child’s account is taxable income; and
- Trump account contribution programs cannot limit contributions to Trump accounts held by specific financial institutions.
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