Turning Tax Law Changes into Strategic Planning Opportunities for Families

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

Key takeaways for high-net worth families

1. Permanent, Indexed Child Tax Credit (CTC) now offers predictable, inflation-adjusted relief, allowing multi-year planning to preserve eligibility and optimize tax liability.
2. Enhanced Employer Education Assistance – A permanent, inflation-indexed $5,250 exclusion for tuition reimbursement and student loan repayment provides value for individuals pursuing advanced degrees
3. Increased Dependent Care FSA Limit – The cap rises to $7,500 in 2026, with annual adjustments, creating more room for pre-tax childcare spending and improved after-tax cash flow management.

Unlocking the permanence and planning potential of the enhanced Child Tax Credit

The latest tax legislation, H.R.1 (formerly the One Big Beautiful Bill Act – OBBBA), delivers a decisive change in family tax policy, replacing a cycle of short-term patches with durable, inflation-aware benefits. At the center is a permanently enhanced Child Tax Credit (CTC), paired with long-overdue modernization of employer education assistance and dependent care flexible spending accounts. Together, these provisions convert uncertainty into planning capacity enabling multi-year strategies that align cash flow, total tax outlay, and household economics.

Beginning in tax year 2025, the maximum CTC increases to $2,200 per qualifying child. The additional $200 is fully allocated to the nonrefundable portion of the credit, ensuring taxpayers with moderate-to-higher liabilities can offset tax due more efficiently. Critically, the refundable component, approximately $1,700 for 2025, is now permanent and indexed for inflation, cementing a predictable floor of support for families with limited or no federal income tax liability. By hard-wiring indexation, H.R.1 ends the stealth erosion that has historically diluted family benefits during inflationary cycles and brings much-needed durability to year-over-year planning.

The CTC phase-outs remain at the Tax Cuts and Jobs Act thresholds, $400,000 for married couples filing jointly and $200,000 for single filers, preserving access for a broad band of middle- and upper-income households. For clients operating near the cliffs, tax control becomes a high-leverage tool: deferring discretionary income, maximizing pre-tax deferrals, and sequencing capital transactions can preserve full or partial eligibility and unlock thousands in incremental benefits.

Maximizing education and childcare tax enhancements for long-term value

Beyond the CTC, H.R.1 cements and modernizes two employer-based levers that meaningfully reduce after-tax costs for education and childcare.

1. Employer provided education assistance

The long-standing $5,250 annual exclusion for employer-provided educational assistance is made permanent and explicitly encompasses both tuition reimbursement and employer student loan repayment. For employees pursuing advanced degrees or working down student debt, this is a clean, above-the-line value stream.

2. Aligning Dependent Care Benefits with Your Family’s Financial Strategy

The dependent FSA contribution limit rises from $5,000 to $7,500 beginning in 2026, with annual inflation adjustments thereafter. This is the first substantive increase since inception and it finally aligns the cap with today’s childcare price points. The expanded limit enhances the economics for dual-income families and single parents who face persistently high out-of-pocket costs, allowing more spend to be routed pre-tax. Because the tax code prohibits “double-dipping” between FSAs and the Child and Dependent Care Tax Credit for the same dollars, optimal positioning requires comparative modeling by income tier, credit phase-outs, and state conformity. In many cases, front-loading daycare or after-school program payments through a maxed-out FSA will out-perform the credit for higher earners, while lower-to-moderate-income households may capture more net value with the credit.

From a planning perspective, the theme is permanence, predictability, and indexation. Families can now build multi-year cash-flow models that incorporate a stable CTC baseline and defensible assumptions for education and childcare benefits. Advisors should standardize a few high-impact workflows: annual CTC eligibility checks tied to year-end income management; proactive comparison of dependent care FSA versus credit ahead of open enrollment; and coordinated review of employer educational assistance alongside 529 strategies and loan repayment schedules. For executives and business owners, there is an additional layer of design latitude as employer plans can be re-engineered to amplify after-tax value without triggering compensation bloat.

Ultimately, H.R.1 moves family policy out of the “patch and pray” era. It increases the nominal value of the CTC, locks in a refundable floor that keeps pace with inflation, and finally right-sizes two employer benefits that have fallen out of step with real-world costs. The net result is not just relief, but strategic clarity: a framework that lets households and their advisors make smarter trade-offs across income, benefits, and timing.

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.