Three Major 2025 Tax Changes for Parents in Trump’s ‘Big Beautiful Bill’

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Three Major 2025 Tax Changes for Parents in Trump’s ‘Big Beautiful Bill’

You may have heard of the Trump tax bill that was recently signed. This key piece of legislation, so-called the “One, Big, Beautiful Bill” (OBBB), impacts millions of Americans through its provisions on health, border security, and taxes.

But what you may not know is how the Trump megabill is expected to affect parents. For instance, some well-known federal tax breaks, like the federal child tax credit, will be boosted. Others, including the personal and dependency exemption, are disappearing forever.

Here are three changes parents should look out for in the OBBB in 2025.

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1. Child tax credit in ‘Big Beautiful Bill’

Under the OBBB, the federal child tax credit (CTC) has increased. Prior law allowed a credit on taxes up to $2,000 per qualifying child under the age of 17. The new law allows up to $2,200.

However, the new child tax credit amount comes with a couple of significant caveats:

The $200 increase only applies to the nonrefundable portion of the tax credit, meaning that your taxable income factors in. Married filing joint couples with $400,000 or more (single filers $200,000 or more) will not be able to claim the full credit.
A Social Security Number (SSN) is required for parents or guardians claiming the tax break. Before the OBBB, eligible families with children could claim the child tax credit regardless of parents’ immigration status.

Households with non-citizen parents will likely be ineligible to receive the credit. This means that the nearly 2.7 million children in the U.S. who previously qualified will no longer be eligible for the credit due to their parents’ immigration status.

But for those who do qualify, the child tax credit has also been indexed for inflation starting in 2026. That will increase the credit amount every year based on inflation-adjusted numbers.

For more information, check out Kiplinger’s report, Here’s How the Child Tax Credit 2025 Amount Will Increase Under Trump.

2. Trump account for kids and newborns

Trump’s megabill also introduces a new type of savings account. The “Trump Account” is designed to save annually for a child’s future educational, homeownership, and entrepreneurial needs.

While sharing some similarities with a 401(k), there are some marked differences. Namely, a Trump account:

Allows parents, relatives, and others to contribute after-tax dollars (up to $5,000 per year) in a child’s name.
Permits savings to grow tax-deferred until the child reaches 18.
Gives children born between 2025 and 2028 seed money of $1,000 in each account.
Auto-enrolls any eligible child who does not have a Trump account.

The last bullet point may be problematic if Trump’s accounts are comparable to 401(k)s. About one-quarter of 401(k) accounts are forgotten, according to USA Today, amounting to $1.65 trillion in unclaimed assets across the U.S.

Since the seed money would likely come from taxpayer dollars, the auto-enrollment feature could lead to millions in tax dollars sitting idle.

However, in a poll conducted several years ago, CNBC reported that 53% of parents don’t open any type of savings accounts for their children.

Trump accounts could encourage more Americans to save for their child’s future and “help produce new capitalists,” as Sen. Ted Cruz (R-Texas), who initially proposed the measure, disclosed to Semafor earlier this year.

For more information, check out Kiplinger’s report, The GOP Wants to Auto-Enroll Your Child in a ‘Trump Account’ for Savings.

3. ‘Big Beautiful Bill’ changes for parents

The Trump tax bill also made permanent the employer-provided paid family and medical leave (PFML) credit. Here’s a quick overview of what that means:

Before, businesses could only take the PFML tax credit for employees who had worked at least one year for an employer. Now, employees who have worked at least six months and for at least 20 hours a week may qualify.
Employers can continue to calculate the credit based on wages paid or, under the new law, on PFML insurance policy premiums.
State or locally mandated paid leave now counts towards satisfying the eligibility requirements for the credit.

While the PFML tax credit is a business tax break, it is designed to encourage employers to offer paid leave to more of their employees.

Only about 27% of private industry employees have access to paid family leave through their employer, according to a recent report by Congress.gov. The expanded PFML tax credit could help more families spend time with their children or support their household during medical leave.

Other parent tax changes under the OBBB include:

Making the federal adoption credit partially refundable, with a $5,000 maximum amount. The credit will also become inflation-adjusted.
Permanently removing the personal and dependent exemption, which was worth $4,150 (indexed for inflation).

Before the Tax Cuts and Jobs Act (TCJA), 292.7 million people claimed personal and dependent exemptions, per the IRS. Total taxpayer savings were in the billions, so individuals could see a reduction in savings with the termination of this key tax break.

What’s still to come?

Although the OBBB has been signed into law, talks continue on Capitol Hill regarding childcare. This may lead to future changes for parents.

For instance, Sens. Katie Britt (R-Ala.) and Tim Kaine (D-Va.) are leading a bipartisan effort titled the “Child Care Availability and Affordability Act” to address current childcare cost challenges through tax code adjustments, like increasing the size and refundability of the child and dependent care tax credit (CDCTC). Some similar changes related to childcare contained in the OBBB are expected to be implemented in 2026.

While the U.S. continues to experience a shortage of affordable, accessible, and high-quality childcare options, future legislative efforts may greatly impact how parents and guardians care for their children. Stay tuned.

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