The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, introduced a range of tax policy changes that may impact parents in both modest and high-income households. From revised credits to new savings vehicles and expanded education benefits, the law offers planning opportunities—along with added complexity.

Updated Credits and Deductions for Parents

The child tax credit received a permanent boost under OBBBA. The maximum credit per child was increased to $2,200 and is now adjusted for inflation. The refundable portion was extended to $1,700 per child, also indexed to inflation. However, eligibility phases out for individuals earning above $200,000 and married couples above $400,000.

The child and dependent care tax credit also expanded. The top credit rate rose from 35% to 50% of qualifying expenses—up to $3,000 for one child under 13 or $6,000 for two or more. For households earning more than $103,000 ($206,000 for couples), only 20% of qualifying expenses apply. Flexible Spending Accounts (FSAs) for dependent care also saw a long-awaited increase, with the pretax contribution limit rising to $7,500 starting in 2026.

“Trump Accounts” and Savings Incentives

A new savings vehicle, informally referred to as “Trump accounts,” was introduced. Parents of newborns can open investment accounts with an initial $1,000 federal contribution. Families can contribute up to $5,000 annually, including $2,500 from employers if offered. Withdrawals are allowed for qualified purposes starting at age 18, and are taxed at the long-term capital gains rate. Nonqualified withdrawals are subject to ordinary income tax and a potential 10% penalty. These accounts are voluntary for employers and may resemble other savings options such as Roth IRAs or 529s.

Expanded 529 Plan Uses

OBBBA also expanded 529 education savings plans. Starting in 2026, families can withdraw up to $20,000 annually for K–12 education expenses, and more categories—like professional certifications—are now considered qualified expenses.

Conversely, changes to student loan provisions, including new borrowing limits and the repeal of the SAVE repayment program, may impact graduate students and borrowers relying on income-based repayment.

AMT and SALT Deduction Adjustments

The law also reset the Alternative Minimum Tax (AMT) thresholds to $500,000 for individuals and $1 million for joint filers. Meanwhile, the state and local tax (SALT) deduction cap was increased to $40,000 through 2029, but phases down for incomes over $500,000—returning to the prior $10,000 cap for those earning $600,000 or more.

Outlook for Planners and Families

For most families, the OBBBA offers a mix of expanded credits and savings options, especially for those planning around education or childcare expenses. However, upper-income households may see more varied results due to the revised AMT rules and SALT limitations.

Talley’s team of tax professionals provides comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on your assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.