New Tax Legislation Brings Big Changes for Families

August 6, 2025

A sweeping new tax and spending law recently signed into effect is set to reshape the financial landscape for American families. From new opportunities to invest in your child’s future to significant changes in education funding and tax credits, the legislation introduces a range of policies that could influence how you save, plan, and pay for your children’s needs.

Here are four of the most impactful updates—and what they might mean for your family.

1. New Investment Accounts for Children Born Between 2025–2028

Starting in 2026, the federal government will start a special savings program. This program aims to give every American newborn a financial head start. Known informally as the “Trump Account,” this new program will offer tax-advantaged investment accounts for children born between January 1, 2025 and December 31, 2028.

Key features include:

●     $1,000 federal seed money automatically deposited into each eligible child’s account.

●     Annual contributions up to $5,000 per child, allowed from family, friends, or employers. Starting in 2028, this amount will be adjusted annually for inflation.

●     Tax-deferred growth, similar to traditional IRAs, with investments tracking a broad U.S. stock index.

●     Account access at age 18, at which point the account converts to a traditional IRA.

●     No early withdrawals permitted.

●     Transfers to ABLE accounts will be allowed at age 17 for children with qualifying disabilities.

What to watch for: While this new savings vehicle holds promise, some important details are still being finalized—such as who will oversee the accounts and how gift tax rules might apply to contributions. Families should continue to prioritize well-established options like 529 plans, custodial accounts, or Roth IRAs while staying informed as this program develops.

2. Child Tax Credit: Higher Ceiling, New Limits

Families relying on the Child Tax Credit (CTC) for relief at tax time will see modest but meaningful adjustments beginning in 2025.

Key changes include:

●     The maximum credit will increase to $2,200 per child under age 17 and will be indexed for inflation in future years.

●     The refundable portion of the credit (the part that could result in a refund) will be capped at $1,700 per child.

●     Income thresholds—$400,000 for joint filers and $200,000 for single or head-of-household filers—are now permanent but will not be adjusted for inflation.

What this means: The higher income limits may help middle- and upper-middle-income households. They might have lost eligibility otherwise. But since those thresholds won’t rise over time, inflation could gradually reduce the credit’s reach.

3. Expanded 529 Plan Uses for Modern Education Needs

Education savings just became more versatile. The new law significantly broadens what 529 plan funds can be used for, reflecting a wider view of educational paths beyond the traditional four-year college degree.

New eligible expenses include:

●     Educational therapy and special needs services, such as speech-language, occupational, or behavioral therapy.

●     Registered apprenticeship costs, including tools, safety gear, and enrollment fees.

●     Testing and admissions-related costs, such as SAT/ACT prep, application fees, and online materials.

●     Up to $20,000 annually for K–12 education, doubling the previous withdrawal cap.

Contribution limits remain unchanged at the federal level—families can still contribute up to the annual gift tax exclusion per beneficiary ($19,000 per individual in 2025).

State-level differences: Not all state 529 plans automatically conform to federal rules, so check with your plan provider to avoid unexpected taxes or penalties at the state level.

4. Major Overhaul of Student Aid and Loan Repayment

The legislation also introduces substantial reforms to the federal student aid system, potentially altering both eligibility for financial aid and repayment strategies for student borrowers.

Key updates include:

●     Eligibility tightening for Pell Grants: Students with a high Student Aid Index (SAI) may lose access, even with low income. Those receiving full college scholarships are now ineligible for Pell.

●     Federal loan caps will be introduced in 2026:

●     $50,000 for undergraduate degrees

●     Up to $150,000 for graduate/professional programs

●     $200,000 lifetime limit across programs

●     $50,000 lifetime cap for Parent PLUS loans (per parent)

●      

Repayment Plans Streamlined:

As of July 1, 2026, borrowers must choose between:

●     A Standard Repayment Plan, with fixed payments over 10 to 25 years.

●     A new Repayment Assistance Plan (RAP), with income-based payments ranging from 1% to 10% of adjusted gross income for up to 30 years.

Other changes include:

●     Stricter deferment rules: No more deferments for economic hardship or unemployment for new loans issued after July 1, 2027.

●     Forbearance limits: Capped at 9 months within a 2-year period.

●     Loan rehabilitation is expanded, allowing a second attempt per loan to bring it out of default.

Employer help extended: A pandemic-era provision allowing tax-free employer student loan contributions (up to $5,250 per year) is now permanent.

Final Thoughts

From newborn savings accounts to restructured loan repayments, this legislation delivers a mix of expanded opportunities and tighter restrictions. Families should stay active. They need to review education plans, use tax credits, and see how the new rules fit their long-term financial goals.

Now is a smart time to revisit your family’s financial strategy and ensure it’s aligned with the evolving legal landscape.

Sources:

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

Disclosure:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.