4 Major Family Finance Changes From the 2025 Tax Law

August 28, 2026

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Key Takeaways

●     New savings opportunities are available for children. Trump Accounts may give families another way to invest for a child’s long-term financial future, but they should be considered alongside options such as 529 plans and Roth IRAs for eligible working teens.

●     The Child Tax Credit remains an important planning tool. Families should continue to factor available tax credits into their broader annual tax strategy and understand how income and eligibility rules may affect the benefit.

●     529 plans are becoming more flexible. Expanded rules allow families to use education savings for a broader range of qualified expenses, potentially making 529 plans useful for more than traditional college costs.

●     Student loan changes make early planning even more important. New borrowing limits, repayment options, and changes to federal aid could affect how families pay for education and manage student debt.

●     Families may want to revisit their financial plans. Changes to savings, taxes, education funding, and student loans make it worthwhile to review your family's goals and determine whether your current strategy still fits.

The tax and spending legislation signed into law in 2025 introduced some of the most significant changes to family financial planning in recent years. From new savings options for children, families have more choices.

Education benefits are improving. Student loan rules are also changing. Many families need to review their long-term plans.

Here are four key developments families should be aware of.

1. New "Trump Accounts" Create Another Way to Save for Children

One of the most discussed parts of the new law is the creation of Trump Accounts. These are new investment accounts that help children build long-term savings early.

Children born between January 1, 2025, and December 31, 2028, are eligible to receive a one-time federal contribution of $1,000 into a newly established account. Families and other contributors may then add up to $5,000 annually, with future contribution limits adjusted for inflation. ‍

The accounts are invested in diversified U.S. stock market index funds and offer tax-deferred growth, allowing savings to potentially compound over many years.

While the accounts are intended to encourage long-term investing, access to the funds is generally restricted until adulthood. Once the beneficiary reaches age 18, the account transitions to operate similarly to a traditional IRA, and distributions become subject to applicable retirement account rules.

Planning Considerations

Trump Accounts may provide an additional savings tool for parents and grandparents, but they should not necessarily replace existing strategies such as:

●     529 education savings plans

●     Custodial investment accounts

●     Roth IRAs for working teenagers

●     ABLE accounts for eligible individuals with disabilities

Each option serves a different purpose, and determining the right mix depends on your family's goals, tax situation, and time horizon.

2. The Child Tax Credit Remains Available

The Child Tax Credit survived the latest round of tax legislation, although several provisions have now been made permanent.

Beginning in 2026, the maximum credit is $2,200 per qualifying child and will continue to receive inflation adjustments over time. The refundable portion of the credit remains limited, and eligibility continues to phase out at higher income levels. ‍

For many middle-income and upper-middle-income households, the most significant benefit may be the permanence of the current income thresholds, which remain substantially higher than those that existed prior to the Tax Cuts and Jobs Act.

Planning Considerations

Families should continue incorporating available tax credits into their annual tax planning strategy. While the Child Tax Credit may not dramatically change a family's financial picture on its own, it can provide meaningful tax savings when combined with other planning opportunities.

3. Expanded Flexibility for 529 Education Savings Plans

Education savings received a significant boost under the new law.

Historically, 529 plans were primarily associated with college expenses. The updated legislation broadens the list of qualified educational expenses, making these accounts more flexible for families pursuing different educational paths.

Eligible uses now include certain K-12 expenses, qualifying tutoring services, Advanced Placement testing fees, educational therapies, and expenses associated with recognized post-secondary credential programs.

In addition, beginning in 2026, up to $20,000 annually may be used for qualifying elementary and secondary education expenses, doubling the previous federal limit.

Planning Considerations

While federal rules have expanded, families should remember that state tax treatment may differ.

Not every state automatically adopts federal changes, meaning a withdrawal that qualifies for favorable federal tax treatment may still create state tax consequences.

Before taking distributions, it is wise to verify how your state's 529 plan administrator treats the expense.

For many families, these changes make 529 plans an even more versatile tool for education funding beyond the traditional four-year college path.

4. Student Loans and Financial Aid Face Major Changes

The legislation also reshapes the federal student aid landscape.

Several popular income-driven repayment programs are being phased out and replaced with a simplified structure. New borrowers will generally choose between a traditional fixed repayment schedule and a new Repayment Assistance Plan (RAP), which bases payments on income.

Federal borrowing limits have also been tightened, with annual and lifetime caps applying to graduate students, professional degree programs, and Parent PLUS loans.

Additionally, eligibility standards for some federal aid programs have become more restrictive, potentially reducing grant opportunities for certain students.

Planning Considerations

Families preparing for college should pay close attention to these changes.

The new borrowing limits could increase the need for advance savings and careful college selection. Students who previously expected federal loans to cover a larger portion of educational expenses may need to explore additional funding sources.

Borrowers should also understand that lower monthly payments under income-based programs can sometimes lead to higher total interest costs over time.

Building a comprehensive college funding strategy has never been more important.

The Bottom Line

The 2025 tax legislation introduces both opportunities and challenges for families.

New savings vehicles like Trump Accounts may help children begin building wealth earlier. ‍

Expanded 529 plan flexibility gives families additional options for education funding. At the same time, student loan reforms and changing aid eligibility rules may require more proactive planning.

As with most financial decisions, the best strategy depends on your unique circumstances. Reviewing your retirement plan, education savings goals, tax situation, and cash flow can help determine whether adjustments are needed under the new rules. ‍

Sources: ‍

https://www.fidelity.com/learning-center/personal-finance/trump-accounts-big-beautiful-bill

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