Understanding the 2025 Tax Law Changes: Child Credits & Trump Investment Accounts
Understanding the 2025 Tax Law Changes: Child Credits & Trump Investment Accounts
On July 4, 2025, President Donald J. Trump signed the One Big Beautiful Bill into law, which included various tax cuts and an increase in credits such as the Child Tax Credit and the Trump Pilot Program. These programs are intended to provide support to parents and provide a boost for the child’s financial future.
Child Tax Credit Changes:
Effective at the end of 2025, the Child Tax Credit will increase to $2,200 (from $2,000) for each qualifying child under the age of 17, with a refundable portion capped at $1,700. The credit begins to phase out at $400,000 for married individuals filing jointly and at $200,000 for all other filers. For dependents aged 17 and older, as well as other qualifying dependents, a credit of $500 per individual is still available.
To be eligible for the tax credit, at least one parent and the child must have a Social Security number.
Trump Account Pilot Program
The Trump Pilot Program permits any child under the age of 18 to establish a Trump investment account. Eligible children born between January 1, 2025, and December 31, 2028, will receive a $1,000 seed deposit into their Trump investment account. Additionally, the investment accounts allow for parents, relatives, and employers to make contributions of up to $5,000 post-tax.
Employers may contribute up to $2,500 annually to their employees’ children, and this amount would not be taxable to the employee.
Withdrawing From Trump Accounts
- All withdrawals are subject to income taxation.
- No withdrawals are permitted before the beneficiary reaches the age of 18.
- Between the ages of 18 and 24, up to 50% of the funds may be withdrawn without penalty for qualifying expenses, including higher education, first-time home purchases, or business capital.
- From ages 25 to 29, up to 100% of the funds may be withdrawn without penalty for qualified expenses.
- Beginning at age 30, all funds may be withdrawn with no usage restrictions.
The Trump accounts are scheduled to open in 2026, and parents will be able to begin making contributions in July 2026.
If you would like to learn more about the employer-provided Childcare Tax Credits or to set up a consultation, call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730.
The above information is of a general nature only and should not be relied upon for specific situations.
