Should You Fund a Trump Account for Your Kids Through Your Business?

There's a new kind of savings account for kids floating around, and it comes with a familiar name: the Trump Account. If you're a business owner with young children, you've probably already had the thought: Can I fund this through my company and get a tax break while I'm at it?

It's a smart question. It's also more complicated than the headlines make it sound. At Patrick Accounting, we've read through the guidance the IRS has put out so far, and the short version is that the rules are still being written. Some of what you'll read online is either premature or flat-out wrong for a business owner in your shoes.

In this article, I'll explain what a Trump Account actually is, walk through the two ways you might fund one for your kids (personally versus through your business), and give you my read on whether the business route makes sense yet. My goal is to keep you from setting something up that you'll have to unwind later.

The short version
A Trump Account is a new type of traditional IRA created specifically for children under 18, with its own special rules for contributions, investments, and withdrawals. Anyone can fund one for your child up to a combined $5,000 per year, and as of July 4, 2026, the accounts are open and accepting contributions. Funding it personally is simple. Funding it through your business for a tax‑favored benefit is possible in theory, but the rules (especially for S corp owners) are still unsettled, and for most small business owners the best answer right now on that method is “wait.”

What Is a Trump Account, in Plain English?

A Trump Account is a new type of traditional individual retirement account (IRA) created specifically for children under 18, with its own special rules for contributions, investments, and withdrawals. 

Here's what makes it different from a regular retirement account:

• It’s for a child who is under 18 at the end of the year and is a U.S. citizen with a Social Security number issued before the account is opened.

• A parent, guardian, or other authorized individual opens and manages it until the child turns 18.

• Combined contributions from all sources are capped at $5,000 per child per year, with cost-of-living adjustments beginning after 2027.

• Kids born between 2025 and 2028 are eligible for a one-time $1,000 federal seed contribution that doesn't count against the $5,000 cap.

• During the “growth period” before age 18, the money has to be invested in diversified, low-cost index funds or ETFs that track broad U.S. stock markets, such as the S&P 500.

• The money is generally locked up until the year the child turns 18, with only limited exceptions, and after that the account is generally treated like a traditional IRA for contribution and distribution rules.

Think of it as a starter retirement account for your kid, like a traditional IRA built for children, with a small government kickstart if your child was born in the right window.

When You Can Start Funding a Trump Account

Here's what you need to know about timing, since it changed recently: Trump Accounts opened on July 4, 2026, and are now accepting contributions. You open one by filing IRS Form 4547 through your IRS online account or the Trump Accounts platform, then fund it up to the annual limit. Many families are expected to enroll quickly once they’re aware of the option.

So, the accounts themselves are live and simple to use. The open questions aren't about whether you can fund one. They're about whether you should route that funding through your business, and that's where the rules still aren't settled. More on that below.

Should You Personally Fund Your Kid's Trump Account?

The simplest path is to fund the account yourself, as a parent, with your own after-tax dollars. You (along with grandparents, relatives, anyone) can contribute up to that combined $5,000 per year.

A few things to know about personal contributions:

• They're not tax-deductible. You're putting in money you've already paid tax on.

• They create “basis” in the account, which matters down the road for how withdrawals are taxed, because distributions are only taxed to the extent they exceed total non-deductible contributions.

• They're simple. No plan document, no payroll, and no compliance testing. You just contribute.

For a lot of business owners, this is the right answer and the end of the story. If your main goal is to get money growing for your kid, personal funding is clean and available to everyone. The complexity only shows up when you try to route the money through your business to get a tax break.

Can You Fund a Trump Account Through Your Business Instead?

Here’s where the “get a tax break while I’m at it” idea comes in. The law does allow employers to contribute to their employees’ Trump Accounts, or to Trump Accounts for their employees’ eligible dependents, on a tax-favored basis through something called a Trump Account Contribution Program.

The appeal is real:

• The business can contribute up to $2,500 per employee per year, to Trump Accounts for that employee or the employee’s eligible dependents.

• That contribution is excluded from the employee’s taxable income under current guidance, although it appears likely that Social Security and Medicare taxes will still apply.

• The business generally gets to deduct it as a compensation expense.

But read that limit again carefully: it’s $2,500 per employee, not per child. If you have three kids with Trump Accounts, current guidance generally treats the $2,500 cap as applying to the total contributions tied to your employment, not $2,500 to each child’s account. And you can’t just wire money to your kid’s account and call it a business contribution. It has to run through a formal, written program that meets IRS requirements.

The Nondiscrimination Catch Most Owners Miss

Before we get into how specific entities are treated, there’s a structural problem for small business owners who want to fund only their own kids: A Trump Account Contribution Program can’t be designed to mainly benefit you.

The rules mirror those for dependent-care assistance programs, and they include tests like these:

• The program can't favor highly compensated employees in who's eligible or how much they get.

• No more than 25% of the total benefits can go to owners who hold 5% or more of the business.

• The average benefit for your rank-and-file employees has to hold up against what the higher-paid folks receive.

In plain English: You can't set up a "program" that just funnels tax-favored dollars into the owner's kids' accounts. If you want the tax benefit, you generally have to offer it to your team too. For a small shop, that math often doesn't work out the way an owner hopes.

Why Funding a Trump Account Is More Complicated for S Corp Owners

If your business is an S corporation (an 1120-S) and you own more than 2% of it, pay close attention, because this is the part the headlines skip.

Owners who hold more than 2% of an S corp are frequently treated differently from regular employees when it comes to fringe benefits. Lots of benefits that are tax‑free for your staff get added back to a more‑than‑2% owner’s taxable wages. Current Trump Account guidance has not yet explicitly addressed whether more‑than‑2% S corp owners will be treated like ordinary employees or subject to those special fringe‑benefit rules, and early commentary from tax professionals is openly cautious about it.

On top of that, based on the proposed regulations, these employer contributions appear likely to be subject to FICA (Social Security and Medicare) taxes even when they’re excluded from income tax. So, the “tax-free” part is narrower than it first sounds, and the details for S corp owners in particular aren’t fully settled yet. If you’re already weighing how to structure owner pay and retirement contributions through your S corp, this is one more piece that belongs in that same conversation.

How Trump Account Funding Works for Partnerships

If your business is a partnership or an LLC taxed as one, here’s the key fact that changes the answer: Partners aren’t employees. When you perform services for your own partnership, the IRS treats you as self‑employed, not as someone on payroll. That matters here because the whole tax‑favored employer contribution depends on an employer‑employee relationship, and you don’t have one with yourself.

So, the employer-contribution route is mostly closed to you for your own kids before you even get to the other rules. If the partnership puts money toward your child’s Trump Account, it’s generally treated as the partnership paying a personal expense on your behalf, not as a deductible business fringe benefit. In practice, that shows up to you either as:

• A guaranteed payment for services, if your tax and accounting team decide to treat it that way, which would be ordinary income and, for most general partners, subject to self‑employment tax

• A distribution/draw, reducing your capital account, with you still effectively using after‑tax dollars

Either way, you don't get the tax-favored "employer contribution" treatment at all, because that treatment runs through an employer-employee relationship you don't have.

There’s one exception worth knowing. If your partnership has actual W‑2 employees, it can set up a Trump Account Contribution Program for them, just like any other employer. The limit is specifically on getting tax‑favored treatment for the owner’s own kids, not on offering the benefit to your team.

The practical takeaway for most partnership owners is to plan on funding your kid’s account personally and keep it simple. The business route doesn’t buy you the same tax advantage it might for a C corp, and it adds complexity to how your compensation and distributions are reported.

1120 vs. 1120-S: Does Your Entity Change the Answer for Trump Accounts?

This is the question that kicked off the whole discussion, so let's answer it directly.

If you’re a C corp (1120), you don’t have the more-than-2% shareholder fringe-benefit problem that S corp owners face, so a Trump Account Contribution Program is, in theory, cleaner for owner participation. You’d still have to satisfy the nondiscrimination rules and offer the program to eligible employees.

If you’re an S corporation (1120-S) and a more-than-2% owner, the fringe-benefit treatment for Trump Account contributions is still an open question, and it’s the main reason I’d tap the brakes before setting anything up.

Either way, the accounts are open now, but the detailed IRS regulations that would answer the business-funding questions cleanly are still being finalized. Setting up a formal program today means making decisions based on proposed rules that aren’t final yet.

And if you haven't looked closely at how your entity choice affects your tax picture, that's worth doing before you layer another program on top of it.

Should You Fund a Trump Account Through Your Business? The Verdict

Here's my verdict for now, and it’s what I’d tell a client sitting across the desk from me.

If you just want to build savings for your kid: You can fund the account personally right now. It's simple, it's available to everyone, and you don't need a lawyer or a plan document. 

If you’re chasing the business tax break: For most small business owners, the answer right now is wait. The per-employee (not per-child) limit, the nondiscrimination rules that force you to include your whole team, the unsettled S corp treatment, and the likely FICA exposure all add up to a benefit that’s narrower and riskier than it first appears. The businesses jumping in early tend to be larger companies with benefits departments built to handle the uncertainty.

That's not a "no." It's a "not yet, so we can get it right." When the final rules land, we'll know exactly how to structure this, and whether it's worth structuring at all for your situation.

If you're weighing whether a Trump Account fits into your family's and your business's bigger financial picture, the same questions come up with every tax-advantaged account you run through your business. Our Business Retirement Plan Comparison Guide is a useful resource for thinking through how those accounts work together. 

And if you'd rather talk it over, we're here when you're ready.

This article reflects IRS guidance on Trump Accounts available as of mid-2026, including Notice 2025-68 and related proposed regulations. The rules are still evolving, and final regulations may change key details. Talk with your accountant before establishing or funding an account.