The One Big Beautiful Bill Act, signed in July 2025, changes how you plan for taxes as a parent. It extends federal tax brackets from the 2017 Tax Cuts and Jobs Act, adjusts credits and deductions, and introduces new savings opportunities. The impact will vary depending on your household income and filing status.
You can now open a tax-advantaged investment account for a newborn with $1,000 to start and up to $5,000 per year, including contributions from an employer. Withdrawals are tax-deferred, and qualified distributions are taxed at long-term capital gains rates. These accounts provide flexibility for long-term savings goals such as retirement or education.
529 plans also received updates. You can withdraw up to $20,000 per year for K-12 education expenses, and professional training or credentialing costs now qualify for penalty-free withdrawals. These changes give you more options to save for your child’s education.
Child-related credits are more generous as well. The child tax credit rises to $2,200 per child, with a higher refundable portion. The child and dependent care credit now covers 50% of qualifying expenses, up to $3,000 for one child or $6,000 for two or more. Flexible spending accounts for dependent care have increased to $7,500 in pretax contributions, providing additional relief on childcare costs.
If your income is higher, limits on itemization, the alternative minimum tax, and state and local tax deductions could reduce some of your benefits. Careful planning will help you maximize savings and avoid surprises.
By understanding these changes, you can make informed decisions to take full advantage of the new accounts, credits, and deductions while managing education and childcare costs effectively.
https://www.accountingtoday.com/news/tax-planning-for-parents-under-obbba
