Tax Changes for Families with Children Under the Big Beautiful Bill
Maximizing new tax changes could be the difference between making ends meet and falling short.
Historically, tax breaks for families have not been a high priority for Republicans, at least according to many. In response, lawmakers have rolled out a variety of tax policy changes to support these parents and help ensure their children have access to the resources they need. The Big Beautiful Bill, which brings substantial changes to child-related tax policies, is a good example.
A certified tax planning professional from Phoenix Tax Consultants helps families maximize these provisions. Our team not only stays abreast of the latest tax law changes. In many cases, we help shape these changes. We testify at legislative hearings, submit reports to lawmakers, and otherwise help ensure that our clients have a voice in this process. This proactive participation puts us in an excellent position to help families reduce their tax liability to the greatest extent possible.
Expanded Child Tax Credit
The expansion of the Child Tax Credit (CTC) was perhaps the most headline-grabbing change in the OBBBA, at least from a child tax perspective.
Previously, families with children under 17 could claim up to $2,000 per child, but the new bill increases this amount and makes the credit more accessible for lower-income families. Now, eligible families can claim up to $3,600 per child under six and $3,000 per child between six and 17. This expansion is beneficial for working parents who may not have had access to significant tax breaks in the past.
Furthermore, under the bill, the CTC may be fully refundable, meaning that even families who don’t owe taxes can receive the full benefit. This under-the-radar change addresses a significant gap. Under prior law, many low-income families missed out on this benefit because they didn’t have enough income to pay federal taxes.
On a related note, the OBBBA also expands the Dependent Care Tax Credit. Lower-income families may now qualify for a larger percentage of childcare expenses to be reimbursed through the tax credit.
These changes underscore the need to partner with a certified tax professional regardless of income. The DIY tax filing era may now be officially over.
CTC Direct Payments and Monthly Disbursements
Moreover, the bill includes provisions for direct monthly payments. Instead of waiting until the end of the tax year to receive the credit as a lump sum, families can receive their Child Tax Credit in monthly installments.
Families that select this option receive regular payments of up to $300 per month per child under six and $250 per month for children aged six to 17. These payments help ensure that families have a steady stream of financial support throughout the year, making it easier to manage childcare, healthcare, education, and other necessary costs.
Baby Bonds
The “Trump Account” is a long-term savings account, like a 401(k) or a 529 college plan. Baby Bond interest builds tax-free, and children may access the funds when they turn 18.
Children who are U.S. citizens and born between January 1, 2025, and December 31, 2028, with a valid Social Security number, are eligible for an initial $1,000 government contribution.
Parents, family members, and even employers can make additional contributions to the account, up to an annual limit of $5,000 from the family (indexed for inflation). Employer contributions are subject to a separate cap.
When the child turns 18 or otherwise becomes an adult, the account generally functions as a traditional IRA. Qualified withdrawals permitted for specific purposes like education, job training, a first home down payment, or starting a business.
For more information about other tax preparation strategies, contact us online or call 610-933-3507.