7 Ways the One Big Beautiful Bill could impact your family’s finances

By Jason R. Friday, CFP®, MPAS®, RICP®, CMFC, Head of Financial Planning | Citizens Wealth Management

_{As Head of Financial Planning, Jason is a strategic partner who is responsible for developing the strategy, managing the planner teams, and coordinating personal financial planning activities across Citizens Wealth Management to help clients navigate and grow in changing circumstances.}

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces substantial changes to the U.S. tax code.

For families, these updates touch everything from childcare and education to retirement and estate planning. If you are raising children or planning to in the near future, here are seven key changes you should know about.

1. Enhanced child tax credit

Starting in 2025, the child tax credit (CTC) increases from a max credit of $2,000 to $2,200 per qualifying child under age 17.

The max refundable portion remains $1,700 per qualifying child and will be adjusted for inflation in future years. Refundable means it can reduce your tax liability below zero and any remaining credit amount counts toward a tax refund.

In addition, the $500 non-refundable credit for other dependents (such as elderly parents or college-aged children) is now permanent.¹ Non-refundable means it can only be used to offset taxes that you owe — you do not receive a refund for any excess credit amount.

This increased CTC could help lead to larger refunds or reduced tax bills, especially for those with multiple dependents.

2. New investment savings vehicle for children

The law introduces new investment accounts for children younger than 18, named Trump Accounts. Children born between 2025 and 2028 who are U.S. citizens, and whose parents have a valid Social Security number, will be eligible to receive a one-time $1,000 contribution from the government to the account.

Starting in 2026, parents or guardians will be able to contribute up to $5,000 to these accounts per year, per child. Contributions are not tax-deductible, but any investment growth is tax-deferred, meaning no taxes are due until the money is withdrawn.

Until the child turns 18, distributions from the account are generally not allowed. Once a child turns 18, they take full ownership of the account, which will then follow rules similar to those of individual retirement accounts (IRAs) for future withdrawals and earnings.²

3. Higher limits for dependent care flexible spending accounts

Beginning in 2026, families can contribute up to $7,500 annually to a dependent care flexible spending account (DCFSA), up from the previous $5,000 cap. These accounts let you set aside pre-tax dollars through your employer to cover eligible dependent care expenses, such as childcare, after-school programs and elder care.³

Because contributions are excluded from your taxable income, they offer an immediate tax benefit. However, any expenses reimbursed through a DCFSA cannot also be claimed for the child and dependent care tax credit.

4. Expanded child and dependent care credit

Under the child and dependent care credit, you could previously claim up to 35% of eligible expenses up to certain limits. The amount used to calculate the credit is a max of $3,000 of expenses for one dependent and up to $6,000 for two or more. While these amounts remain the same, eligible taxpayers can now claim up to 50% of their eligible expenses starting in 2026.⁴

The exact percentage depends on your adjusted gross income (AGI). The max credit rate is for those with an AGI of $15,000 or less and then gradually phases down to a minimum of 20% once it reaches $105,000 for single filers or $210,000 for married joint filers. Additionally, this credit is non-refundable, meaning it can only be used to offset taxes that you owe.⁵

5. Adoption credit is now partially refundable

The adoption credit was previously non-refundable. The OBBBA changes that by making up to $5,000 of the credit refundable. This means that even if a family doesn't owe enough in taxes to use the full credit, they may receive a cash refund of up to $5,000.⁶

The total credit remains subject to income limits and will adjust annually for inflation.

6. More flexibility with 529 plan withdrawals

Families can now withdraw up to $20,000 per year per student from a 529 plan for K–12 education expenses, which is double the previous limit.⁷

Although 529 plans are primarily used as a tax-advantaged college savings account, this expansion gives families more flexibility to use the funds for private school tuition and other pre-college educational expenses.

7. Employer educational assistance

The OBBBA makes permanent the tax-free treatment of employer-provided education assistance, including student loan repayment support. If your employer offers this benefit, you can receive up to $5,250 per year tax-free for tuition, fees or eligible student loan payments.⁸

Other notable changes that impact families

Four additional changes to be aware of include:

• Income tax brackets: The seven tax brackets created by the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent, which are 10%, 12%, 22%, 24%, 32%, 35% and 37%.⁹
• Estate and gift tax exemption: This increases from $13.99 million per individual in 2025 to $15 million in 2026.¹⁰
• Federal student aid changes: There were significant changes made to federal student aid programs. Visit studentaid.gov for the latest updates.
• Temporary deductions (2025 – 2028):
• Eligible workers may be able to claim deductions on their overtime pay or tips up to a designated amount.¹¹
• Taxpayers 65 and older may be able to claim an additional $6,000 deduction, intended to help offset taxes on Social Security benefits.¹²

What the OBBBA could mean for your financial plan

The OBBBA introduces a wide range of changes that could influence how families save, spend and invest. Now is a good time to revisit your financial plan and consider how these updates align with your goals. A thoughtful review could help you identify new opportunities and avoid unintended consequences.

While a tax professional can advise on how the law affects your personal tax situation, a Citizens Wealth Advisor* can help you understand how these changes may impact your broader financial plan. The right plan can help you move forward with clarity and confidence.

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