The One Big Beautiful Bill Act: Tax Impact on Your Family

The One Big Beautiful Bill Act (OBBBA), enacted in 2025, introduces a wide range of tax and benefit changes that significantly impact American families. Below is a summary of the most important provisions affecting families, organized by topic:

Child and Family Benefits

Child Tax Credit (CTC)

In the One Big Beautiful Bill Act, the expanded Child Tax Credit is made permanent and increased to $2,200 per qualifying child, with inflation adjustments after year 2025. The refundable portion remains, and stricter Social Security Number (SSN) requirements are imposed for both the taxpayer and the child. The increased amount goes into effect for tax years after 2024. 

There is a phaseout threshold when a taxpayer’s modified adjusted gross income (MAGI) exceeds 

• $400,000 for joint filers
• $200,000 for all other filers.

For every $1,000 that MAGI exceeds the threshold, the total Child Tax Credit is reduced by $50. 

For example, suppose a married couple filing jointly has a MAGI of $420,000 and two qualifying children. The maximum CTC per child is $2,200 but their MAGI exceeds $400,000 by $20,000. Their total CTC would be reduced by $1,000 and would result in a CTC credit of $3,400. 

Taxpayers will be fully phased out of the credit if they are married filing jointly and have one child at a MAGI of $444,000 and $244,000 if single. The phaseout range increases by $44,000 for each additional qualifying child. 

Child and Dependent Care Tax Credit (CDCTC)

The credit is enhanced, with the applicable percentage increased to 50% (phasing down to 35% at $15,000 AGI, then to 20% at $75,000 AGI for singles/$150,000 for joint filers). 

The maximum expenses did not change and remain $3,000 for 1 child and $6,000 for 2 or more.

Dependent Care Assistance Program

The exclusion limit for employer-provided dependent care assistance is increased from $5,000 to $7,500 ($3,750 MFS) for taxable years beginning after December 31, 2025. No changes were made to the eligibility and plan requirements.

Adoption Credit

Up to $5,000 of the adoption credit is now refundable effective for tax year 2025, and the credit is adjusted for inflation. For 2025 the base amount is $14,440. Any unused nonrefundable portion of the credit can be carried forward for up to five years. 

The credit is reduced for taxpayers with MAGI above $150,000 and is phased out over a $40,000 range; this phase out range is increased for inflation. 

Employer-Provided Child Care Credit

For amounts paid or incurred after December 31, 2025, the credit is increased to 40% of qualified child care expenditures (50% for eligible small businesses), plus 10% of qualified child care resource and referral expenditures. 

The dollar limit increased from 150,000 to $500,000 ($600,000 for eligible small businesses). These limits are indexed for inflation.

Enhancement of Paid Family and Medical Leave Credit

The One Big Beautiful Bill Act makes the paid family and medical leave tax credit permanent, removing the prior expiration date of December 31, 2025. 

Employers may now elect to claim the credit based on either (A) wages paid to qualifying employees during leave, or (B) the total amount of premiums paid or incurred for an insurance policy providing paid family and medical leave, if such a policy is in force during the taxable year.

Education and Savings

529 Accounts

The definition of qualified expenses is expanded to include more K-12 expenses including the following: 

• Tuition
• Curriculum and curricular materials
• Online educational materials
• Tuition for tutoring or educational classes outside of the home
• Fees for standardized test, advanced placement exams, or college admission exams
• Fees for dual enrollment in higher education institutions
• Educational therapies for students with disabilities provided by licensed or accredited practitioners (this includes occupational, behavioral, physical, and speech-language therapies)

The annual limit for K-12 expenses that can be treated as qualified expenses increased from $10,000 to $20,000 per year, effective taxable years beginning 2026. 

Post-secondary credentialing expenses are now included as qualified higher education expenses and include:  

• Tuition, fees, books, supplies, and equipment required for enrollment or attendance in a recognized post-secondary credentialing program.
• Fees for testing required to obtain or maintain a recognized post-secondary credential.
• Fees for continuing education are required to maintain such a credential.

Employer Student Loan Payments

The $5,250 per year exclusion for employer-paid student loans is made permanent and indexed for inflation. Employer payments for qualified education loans are excluded from employee’s gross income and are not subject to federal income tax, social security tax, Medicare tax or federal unemployment tax.

Trump Accounts

The One Big Beautiful Bill Act introduces tax-advantaged savings accounts for children under 18. These accounts are created with a $5,000 annual contribution limit and a $1,000 government-funded pilot for newborns born after December 31, 2024 and before January 1, 2029. 

• The Trump Account is treated as a type of IRA but contributions to a Trump Account do not count against the contribution limits for other IRAs.
• Earnings in the accounts grow tax-deferred.
• No distributions are allowed before age 18 except for distributions of excess contributions, upon death of the beneficiary before age 18, or qualified rollover contributions.
• No deductions are allowed for contributions.
• Funds may only be invested in mutual funds or exchange-traded funds (ETFs) that track a qualified index, do not use leverage and have annual fees and expenses not exceeding 0.1% of the balance.
• Employers may contribute up to $2,500 per employee to Trump Accounts for employees or their dependents and this contribution is excluded from employee’s gross income.
• Applies to taxable years beginning after December 31, 2025.

We will continue to keep up-to-date on new guidance regarding the One Big Beautiful Bill Act and how it may pertain to your family’s tax situation and will send out more information and guidance as it is made available.