One Big Beautiful Bill for Families: Child Tax Credit and Trump Accounts (Part 3 of 5)
The One Big Beautiful Bill Act (OBBBA) includes several provisions that may affect families with children, parents planning for adoption, and individuals choosing health insurance coverage.
This is Part 3 of our five-part series on the basics of OBBBA for families. This article focuses on the Child Tax Credit, the Other Dependent Credit, Trump Accounts, the Adoption Tax Credit, and Health Savings Account changes.
These are federal tax provisions. They generally apply to eligible Washington residents when they file their federal returns. Washington does not have a state individual income tax, so these benefits do not create a separate Washington income tax credit.
Child Tax Credit Increased
Beginning with the 2025 tax year, the maximum Child Tax Credit increases to $2,200 per qualifying child.
The credit applies to eligible children who meet the federal requirements, including the age, relationship, residency, and identification rules. A qualifying child is generally under age 17 at the end of the tax year.
The credit is divided into two parts:
- Up to $2,200 total per qualifying child
- Up to $1,700 refundable per child
A refundable credit can provide a refund even when it is larger than the federal income tax you owe. The remaining portion of the Child Tax Credit is generally nonrefundable. It can reduce your federal income tax to zero but usually cannot create a refund by itself.
The refundable portion is claimed through the Additional Child Tax Credit. The amount a family receives depends on income, the number of qualifying children, and other eligibility requirements. The full $1,700 is not automatic for every child or every taxpayer.
The law also makes the increased Child Tax Credit permanent under current law. Starting in 2026, the amount is adjusted for inflation, so the annual limit may change slightly in future years.
The phaseout thresholds are also retained:
- $200,000 for most single filers
- $400,000 for married couples filing jointly
The credit begins to decrease when modified adjusted gross income exceeds the applicable threshold.
Other Dependent Credit Made Permanent
Families may also receive an Other Dependent Credit of up to $500 for a qualifying dependent who does not meet the requirements for the Child Tax Credit.
This may apply to certain older children, parents, or other qualifying relatives. The credit is generally nonrefundable, meaning it can reduce federal tax owed but does not usually create a refund.
The $500 credit is now permanent under current law. Eligibility still depends on the dependent tests and other federal requirements.
When preparing your return, review every person you support. A dependent may not qualify for the Child Tax Credit but could qualify for the Other Dependent Credit.
Trump Accounts for Children
OBBBA created a new type of custodial savings and investment account for eligible children. These accounts are commonly called Trump Accounts.
The account is designed for long-term savings. Parents, guardians, or other authorized individuals can establish an account for an eligible child.
Federal $1,000 Deposit
A qualifying child born from January 1, 2025, through December 31, 2028, may be eligible for a one-time federal deposit of $1,000.
The federal deposit must be elected through the required process, including IRS Form 4547. Parents should retain the child’s birth and identification records and watch for additional IRS or Treasury instructions about establishing the account.
The federal deposit is separate from regular annual contributions. It generally does not count toward the annual contribution limit.
Contributions by Parents and Others
Parents and other individuals may contribute up to $5,000 per year per account, subject to the rules and limits that apply to the account.
Employers may also contribute up to $2,500 per year for an employee’s account or the account of the employee’s dependent. Eligible employer contributions are generally tax-free to the employee.
The employer limit is generally part of the overall annual contribution limit. For example, an employer contribution does not normally allow a family to add another separate $5,000 on top of the account’s annual limit. Families should track contributions from all sources.
The $1,000 federal deposit is treated separately from regular contributions.
Investments and Withdrawals
Trump Account funds are invested in qualifying U.S. stock index funds or other investments allowed under the account rules. The account is intended for long-term growth rather than short-term family expenses.
Withdrawals generally become available after the child reaches age 18. The tax treatment is generally similar to a traditional IRA, which means distributions may be taxable depending on the amount, timing, and applicable exceptions.
Because these accounts are new, families should review current IRS guidance before making withdrawals. Rules may address contribution timing, investment choices, beneficiary rights, and early distributions.
For the latest federal information, review the IRS One Big Beautiful Bill provisions and the Form 4547 instructions.
Adoption Tax Credit Enhancement
OBBBA also changes the federal Adoption Tax Credit.
Beginning in 2025, up to $5,000 of the adoption credit may be refundable. This is important for families whose federal tax liability is lower than the available credit.
Before this change, the adoption credit was generally nonrefundable. It could reduce federal income tax owed, but unused credit could not generally be paid as a refund.
The adoption credit still depends on qualified adoption expenses and other eligibility rules. The total credit may be higher than $5,000, but only up to $5,000 of the credit is refundable under the new provision. The remaining amount generally remains nonrefundable.
Keep detailed records of eligible expenses, including qualified fees, court costs, travel, and other expenses allowed under federal law. Adoption situations can be complex, especially when an adoption is incomplete, involves special-needs eligibility, or takes place across tax years.
Health Savings Account Expansion
OBBBA expands access to Health Savings Accounts in two important ways.
Telehealth Before the Deductible
Starting with eligible plan years beginning after December 31, 2024, a high-deductible health plan may cover certain telehealth and remote care services before the deductible is met without automatically making the plan ineligible for HSA purposes.
This can help families use virtual medical services while still maintaining HSA eligibility. The plan must still meet the applicable requirements, and not every telehealth benefit will necessarily qualify.
Check your plan documents or contact the insurer before assuming that a telehealth benefit is HSA-compatible.
Bronze and Catastrophic Plans
Beginning in 2026, qualifying Bronze and Catastrophic health plans available through an Exchange are treated as HSA-compatible high-deductible health plans under the new rules.
This may give some Washington families more plan choices when selecting coverage through the health insurance marketplace. Eligibility still depends on the exact plan, enrollment period, and other HSA requirements.
Before contributing to an HSA, confirm that:
- You are enrolled in an HSA-compatible plan.
- You do not have disqualifying additional coverage.
- You are not enrolled in Medicare.
- You are not claimed as someone else’s dependent.
- Your contributions stay within the annual IRS limit.
The IRS guidance on the new HSA benefits provides additional information.
What Washington Families Should Do
The new rules may affect your federal tax return, family savings decisions, and health coverage choices.
Use this checklist:
- Review your children and dependents. Confirm names, dates of birth, Social Security numbers, residency, and support information.
- Check your 2025 Child Tax Credit eligibility. The increased credit applies to the 2025 tax year, filed in 2026.
- Track dependent-related credits. A child who does not qualify for the Child Tax Credit may qualify for the Other Dependent Credit.
- Save adoption records. Keep documentation for all qualified adoption expenses.
- Review Trump Account eligibility. If your child was born between 2025 and 2028, review Form 4547 and current IRS instructions.
- Coordinate contributions. Track parent, family member, and employer contributions to avoid exceeding annual limits.
- Confirm HSA eligibility. Review your 2026 health plan before making HSA contributions.
- Ask for a tax review. The interaction between credits, income, dependents, and account contributions may require careful preparation.
Statewide Tax Services provides virtual tax preparation, e-filing, accounting, and tax consultations for individuals and businesses. We are accepting clients for the 2025 tax year and can review your family’s situation before you file.
Schedule a consultation through our online calendar, or learn more about individual tax preparation and our tax preparation process.
IRS Child Tax Credit information
Congress.gov: H.R. 1, 119th Congress
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