Entity Setup
Entity Setup Case Study: Using Trump Accounts and PFML Credit
Examine how small businesses can set up Trump Accounts for dependents and leverage Paid Family and Medical Leave credits to optimize their tax position.
By NomadicTax Research Team • 5-8 min read • September 10, 2026
## What Are Trump Accounts & PFML Credit?
**Trump Accounts** are a new tool under the Working Families Tax Cuts law allowing eligible children to receive a one-time federal contribution and offering new tax elections. **PFML Credit** (Paid Family and Medical Leave Credit under section 45S) provides a business credit for employers that offer qualifying leave. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-permanent-expansion-of-paid-family-and-medical-leave-under-the-working-families-tax-cuts?utm_source=openai))
## Case Study: Small Business Owner Sara
Sara runs a business with 10 employees. She often pays wages while employees take maternity leave or care for sick family members. She wants to maximize tax benefits in setting up new tools for her employees and her own family.
### Trump Accounts Election
- Sara has two children who are eligible. Under **section 6434**, a one-time **$1,000 initial pilot contribution** is available for each eligible child when election is made. ([irs.gov](https://www.irs.gov/pub/irs-irbs/irb26-13.pdf?utm_source=openai))
- She reviews proposed rules for making an election to open Trump Account, ensuring she meets eligibility and filing requirements. ([irs.gov](https://www.irs.gov/newsroom/news-releases-for-current-month?utm_source=openai))
### PFML Credit Optimization
- Starting 2026, Sara can claim up to **25%** credit of wages paid for up to 12 weeks of qualifying PFML leave. The credit rate ranges from **12.5% to 25%** depending on leave policies. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-permanent-expansion-of-paid-family-and-medical-leave-under-the-working-families-tax-cuts?utm_source=openai))
- PFML premiums paid for insurance policies also qualify under new guidance, providing more flexibility around structuring PFML benefits. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-permanent-expansion-of-paid-family-and-medical-leave-under-the-working-families-tax-cuts?utm_source=openai))
## Key Considerations & Structure
- **Election process matters**: For Trump Accounts, small business needs to follow specific IRS rules, elections, and deadlines to receive pilot contributions. Check deadlines and consult proposed vs final regulations. ([irs.gov](https://www.irs.gov/pub/irs-irbs/irb26-13.pdf?utm_source=openai))
- PFML: decide whether to use **wage-based** or **premium-based method**. Employers should compare benefit-cost trade-offs. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-permanent-expansion-of-paid-family-and-medical-leave-under-the-working-families-tax-cuts?utm_source=openai)) as well as ensure leave meets statutory definitions.
- Be aware of state mandates: state or local PFML leave may count toward eligibility but not toward calculation of the credit. (You can’t double-count state leave for both credit amount and leave eligibility) ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-permanent-expansion-of-paid-family-and-medical-leave-under-the-working-families-tax-cuts?utm_source=openai))
## Action Steps for Business Owners
1. Review employee base and leave policies to determine the right PFML design. Estimate the cost vs tax credit benefit.
2. Consult with legal/tax advisor to properly establish Trump Accounts: make elections, ensure compliance with section 530A and related rules. Surveys of proposed regulations are ongoing. ([irs.gov](https://www.irs.gov/pub/irs-irbs/irb26-29.pdf?utm_source=openai))
3. Update payroll and HR systems to track tips, overtime, and qualifying tips under new OBBB rules. Many gig-economy or tipped workers will want to take advantage of “no tax on tips” deduction. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
4. Communicate with employees about PFML and their rights; ensure documentation, so in audits you have proof leave was qualifying.
Through careful planning, combining these tools can significantly reduce payroll and income tax cost, enhance employee benefits, and align your business with the Working Families Tax Cuts.