Turning Tax Law Changes into Strategic Planning Opportunities for Families

H.R.1 enhancements to Child Tax Credit, education assistance, and dependent care benefits

Recent tax legislation, H.R.1, formerly known as the One Big Beautiful Bill Act (OBBBA), delivers long-overdue enhancements to family-related tax provisions. For high-net-worth individuals, these changes open new doors for multi-year planning strategies that align with goals around cash flow, tax efficiency, and intergenerational wealth management.

At the center of this legislation are three key updates:

• A permanent, inflation-adjusted Child Tax Credit (CTC)
• Enhanced employer education assistance programs
• An expanded dependent care flexible spending account (FSA) limit

Each offers a distinct opportunity to optimize after-tax outcomes through strategic decision-making.

Key takeaways for high-net-worth families

1. Permanent, indexed Child Tax Credit (CTC): Now offers predictable, inflation-adjusted relief, enabling multi-year planning to preserve eligibility and optimize tax liability.
2. Employer education assistance: A permanent, inflation-indexed $5,250 exclusion for tuition reimbursement and student loan repayment offers value to those pursuing advanced degrees or paying down educational debt.
3. Dependent care FSA expansion: A $7,500 cap (beginning in 2026, with annual indexing) creates more room for pre-tax childcare spending and improved after-tax cash flow management.

Unlocking the planning potential of the enhanced Child Tax Credit

Beginning in tax year 2025, the maximum CTC increases to $2,200 per qualifying child, with the additional $200 applied to the nonrefundable portion of the credit. This enhancement delivers direct relief to families with moderate-to-higher tax liabilities.

More importantly, the refundable portion, approximately $1,700, is now both permanent and indexed to inflation, putting an end to the quiet erosion of tax benefits during inflationary cycles. This makes long-term financial modeling more reliable and adds durability to year-over-year planning.

The CTC’s phase-out thresholds remain unchanged at:

• $400,000 for married couples filing jointly
• $200,000 for single filers

This preserves eligibility for a wide band of upper-income households. For those approaching these thresholds, tax control becomes a high-leverage planning tool. Strategies like deferring discretionary income, maximizing retirement plan contributions, and timing capital gains can preserve full or partial eligibility, unlocking thousands in additional value over time.

Maximizing education and childcare tax enhancements for long-term value

1. Employer-provided education assistance

H.R.1 permanently extends the $5,250 annual exclusion for employer-provided educational assistance and importantly, expands it to include student loan repayment. Beginning in 2026, this benefit will also be indexed for inflation, allowing the value to keep pace with rising education costs.

For dependents pursuing graduate programs or working down education debt, this represents a clean, above-the-line tax benefit. For executives and business owners, it becomes a flexible compensation lever providing meaningful value without increasing taxable wages.

2. Aligning dependent care benefits with your family’s financial strategy

Effective in 2026, the dependent care FSA limit increases from $5,000 to $7,500, with annual inflation adjustments to follow. This is the first substantial increase in decades and better aligns the tax code with today’s childcare expenses.

Strategic considerations:

• FSAs allow for pre-tax allocation of funds toward eligible childcare expenses, offering significant tax savings for high earners.
• However, the IRS prohibits “double-dipping” families cannot claim both the FSA and the Child and Dependent Care Tax Credit for the same dollars.
• For high-net worth families, maximizing the FSA often yields greater after-tax value than claiming the credit.

To determine the optimal path, households should work with advisors to compare benefits based on:

• Income tier and credit phase-outs
• State conformity rules
• Timing of dependent care payments (e.g., daycare, after-school programs)

Building a smarter multi-year plan

H.R.1 enhancements allow families and advisors to develop multi-year cash flow and tax strategies with greater confidence.

Recommended advisory workflows:

• Annual CTC eligibility reviews during year-end tax planning
• Pre-enrollment comparisons of dependent care FSA vs. tax credit
• Reviews of employer education assistance, student loan repayment, and 529 plan strategies

For business owners and executives, there is even more opportunity: redesign benefit plans to amplify after-tax value without triggering additional wage taxation.

For high-net-worth families, H.R.1 provides more than tax relief, it offers the ability to build smarter, more strategic frameworks across income, benefits, and long-term planning.

Next steps

These changes mean that you should proactively review your tax strategies. With permanent and expanded deductions, this is an ideal time to consult your Keiter Opportunity Advisor.

Keiter’s High-Net Worth Tax team will provide more details on tax planning opportunities and updates as the IRS releases guidance.

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