Now kids will be born with tax deductions and savings checks! Without these, parents save for children after taxes up to 37%. And they can’t gift assets to children in low tax brackets because the IRS charges a “Kiddie Tax” (Forms 8615 or 8814) on children’s investment income above $2,600. Trump’s Big Beautiful Bill (OBBBA) promises significant tax benefits to working families: Investments with Trump Accounts, larger Child and Dependent Care Credits, increased Child Tax and Other Dependent Credits, more flexible 529 savings plans and educational vouchers.
Credits for Kids
Starting in 2025, adoptions become more attractive as families take enhanced adoption credits of up to $17,280 with refundable credits up to $5,000.
Effective 2025, Trump made permanent increased Child Tax and Other Dependents Credits. Child Tax Credits rise from $2,000 to $2,200 and Employer Dependent Care Assistance rises to $7,500 in 2026—$5,000 for CA. The $500 Other Dependents Credit is non-refundable. Income phaseouts begin in 2025 at $200K for singles or $400K for married couples. Bipatisanpolicy.org estimates that “An estimated 23.8 million children will benefit from the larger CTC; however, those from households with lower incomes will see a smaller impact” because the Child Tax Credit only refunds $1,700.
Child and Dependent Care Credit
Many parents, working or seeking work, claim Child and Dependent Care credits for daycare, summer school or afterschool care and they submit pre-school EIN’s and other information—which now must include one parent’s SSN. In 2026, maximum credits for one qualifying child increased from $1,050 to $1,500 and from $2,100 to $3,000 each to $6,000 for multiple children. But CDC credits phase downwards from 50% for earners below $15,000 and become 20% credits for MFJ filers over $150,000.
Stocks for Babies
Starting July 1, 2026, families can receive $1,000 in a “Trump Account” for newborns born 2026-28 from the government, while employers contribute pre-tax up to $2,500 yearly to the equivalent of an IRA that can only be spent at age 18. For anyone under 18, families, friends, nonprofits or the government may add yearly to these funds after-tax with aggregate contributions limited to $5,000 annually.
Excepting family contributions withdrawn tax free, withdrawals may be taxed at the beneficiaries’ tax rate or rolled into IRAs for retirement with no work or educational use requirements. They earn money not at Social Security rates, but with low-fee US stock index funds. This benefit manifests when savings multiply into significance with the time value of money.
Tax-advantaged alternatives to Trump accounts include Roth accounts where children contribute earnings (which parents may pay) but tax-free early withdrawals of principal are possible, 529 Plans offer investment choices more limited than liquid UTMAs, but anyone can invest after tax in 529 accounts meant for education, 529s can be transferred to other students. Withdrawals for education are tax free and 529s are treated as parental assets on the FAFSA—denting financial aid less. Take government or employer money for Trump accounts, but 529s still fund the best college plans.
California’s Challenge for Educational Choice
Like Roth IRAs, parents contribute after-tax funds to 529s, which grow and then pay out tax free for education. Starting in 2025, OBBBA funds homeschooling or K-12 costs like books, online learning and tutoring fees; in 2026, they can deduct up to $20,000 of expenses and private school tuition. Now 529s can be used for industry-recognized employment credentialing programs or to pay off up to $10,000 in student loans. After 15 years of 529 participation, 529s up to $35,000 can be rolled directly into Roth accounts.
In 2026, $1,700 credits to “Scholarship Granting Organizations” with dollar-for-dollar tax reductions fund private school tuition, educational supplies, transportation, etc., in states that sign up. California may snub Trump vouchers at first, but parents as voters will demand federal funds for tutoring, supplies and transportation without threatening government-run, union-staffed, schools. Brookings.edu, favoring DEI and other progressive policies, prophesies: “There’s a way to squint at this law, flawed as it is, and see how this could become a boon for educational choice in red states and educational enrichment in blue states.”
Trump rewards working families with generous tax support of children’s expenses and savings at stock market rates. But educational choice could lead to an exodus from public schools and Trump tax breaks must be evaluated alongside federal deficits, tariffs and reduced spending.
Robert Arne, EA, CFP, MS, of Carpe Diem Financial Life Planning, is a Santa Cruz Mountain Certified Financial Planner who gives holistic financial advice as his client’s fee-only fiduciary. These articles are not personal financial, mortgage, tax or investment advice; consult appropriate professionals. Learn more at www.carpediem.financial.
