The One Big Beautiful Bill Act of 2025 (OBBBA) includes several tax breaks for parents. Here’s a summary of what’s in the bill for families, along with planning tips to maximize each tax break.

Deductions, credits, and more

Parents get a permanent increase to the child tax credit. The child tax credit increases to $2,200 (up from $2,000) and is now permanent. The refundable portion stays at $1,700, with future adjustments tied to inflation. If your adjusted gross income will approach $200,000 (single) or $400,000 (married), look for ways to reduce your income to avoid phasing out the credit. Strategies like contributing more to retirement accounts, health savings accounts, or flexible spending accounts can help keep you below the limit and maintain your eligibility for the full credit.

Adoption tax credit. $5,000 of the $17,280 adoption tax credit in 2025 is now refundable, even for families with little or no income tax liability. To take full advantage of the nonrefundable portion of the credit (up to $12,280), you’ll need to have a tax liability. Consider delaying certain deductions. Otherwise, if possible, shift taxable income into the year you claim the credit so you can take advantage of the non-refundable portion of the credit. However, remember that the credit starts to phase out at an income of $259,190.

Trump accounts. Each child born between January 1, 2025, and December 31, 2028, will receive a $1,000 tax-advantaged investment account at birth. Parents, grandparents, and qualified organizations can contribute up to $5,000 per year until the year before the child turns 18. Funds can be withdrawn starting the year the child turns 18. There are still many unanswered questions about this new account and its related tax break. There are also other, and potentially better, options to save for your child, including Roth IRAs. While we await further clarification, consider using alternative tax-free or tax-advantaged accounts for your child.

Education loans and plans

Student loan cancellation is tax-free. Forgiveness of student loans due to death or permanent disability is now permanently excluded from taxable income. Review disability paperwork for accuracy and ensure it is completed and submitted through the appropriate loan service office or the Department of Education’s Total and Permanent Disability discharge process. If you’re a parent borrower (such as with a PLUS loan), consider including this tax benefit in your estate or disability planning discussions.

529 Education Plans. The annual limit for K–12 tuition withdrawals doubles to $20,000 per student beginning in 2026. These funds can now also cover books, tutoring, online materials, homeschool costs, and educational therapies for children with disabilities. You can also use 529s for post-secondary teaching certifications and trade programs. While contributions to a 529 plan aren’t deductible on your federal tax return, you can front-load up to five years’ worth of the annual gift tax exclusion into a single year. The 2025 exclusion is $19,000, so you can contribute up to $95,000 (5 x $19,000) to a 529 plan per beneficiary (up to $190,000 if married).

As always, please don’t hesitate to contact our RRBB advisors if you have any questions.