What Texas Families Need to Know About the Expanded Child Tax Credit and 'Trump Accounts'

Two major updates in the 2025 tax bill (the One Big Beautiful Bill Act) offer powerful planning tools for Texas families: a permanent increase in the Child Tax Credit and the creation of a new tax-deferred savings account for children, commonly known as Trump Accounts.

Child Tax Credit: What’s New

• Credit increased to $2,200 per child under age 17, starting in 2025

• Still partially refundable—up to $1,400 can be received even with zero tax liability

• Phase-out begins at $400,000 MAGI for joint filers ($200,000 single)

• No expiration—this enhancement is permanent under the new law

Why This Matters in Texas:
Texas families often carry higher out-of-pocket costs for childcare, healthcare, and education, yet receive no relief from state income tax. This expanded federal credit offers a meaningful annual boost in after-tax income for households with children.

Trump Accounts: A New Tax-Deferred Option for Children

• Government seed contribution: $1,000 for children born between Jan 1, 2025 and Dec 31, 2028

• Annual contribution cap: $5,000 per child (from parents, relatives, or others)

• Funds grow tax-deferred

• Withdrawals not allowed before age 18; after age 18, accounts function similarly to traditional IRAs

• No income limits for contributors

Contribution Eligibility:

• Phases out at $200,000 MAGI (single) and $400,000 MAGI (joint)

• Contributions can be made by parents, grandparents, or guardians

Smart Planning Moves

1. Open Trump Accounts Early
Starting at birth allows 18+ years of compounded tax-deferred growth. Even modest annual contributions can grow significantly.

2. No Special Withdrawal Exceptions (Yet)
Unlike 529 plans, Trump Accounts currently do not allow early withdrawals for education or first-time home purchases. They are strictly tax-deferred until age 18 and beyond.

3. Gifting from Grandparents
Grandparents can contribute up to $5,000 per grandchild without gift tax reporting by using the annual exclusion. This can be a powerful estate planning strategy too.

4. Align With Family Business Goals
For family-owned businesses, these accounts can help fund succession planning or housing for next-generation leadership.

Book a family-focused tax planning session to explore how these tools can work for your unique goals.