As 2025 draws to a close, American families are waking up to one of the most significant tax changes in a generation: the child tax credit has been made permanent at an enhanced level of $2,200 per child, while a new program creates government-funded investment accounts for newborns. Here's everything you need to know.

The Tax Cliff That Didn't Happen

When Congress passed the Tax Cuts and Jobs Act (TCJA) in 2017, it doubled the child tax credit from $1,000 to $2,000 per child—but that increase was set to expire at the end of 2025. Without congressional action, families would have faced a sudden reduction in their tax benefits starting with their 2026 returns.

The One Big Beautiful Bill Act, President Trump's sweeping spending package passed in July, eliminated that cliff entirely. The legislation not only made the enhanced credit permanent but increased it further to $2,200 per child, indexed to inflation going forward.

What the Changes Mean for Families

For a typical family with two children, the permanent $2,200 credit means $4,400 in annual tax savings—or more than $366 per month. The inflation indexing ensures this benefit will grow over time rather than being eroded by rising costs.

Key features of the permanent child tax credit include:

  • Maximum credit: $2,200 per qualifying child (up from $2,000)
  • Inflation adjustment: Credit amount will increase annually with inflation starting in 2026
  • Income thresholds: The expanded income thresholds from TCJA have also been preserved
  • Refundable portion: The Additional Child Tax Credit (ACTC) equals 15% of earnings above $2,500, up to $1,700 per child in 2025

The Revolutionary 'Trump Accounts'

Perhaps the most novel provision of the new law is the creation of so-called "Trump Accounts"—tax-advantaged investment accounts for children born in 2025 and future years through January 1, 2029.

Here's how they work:

  • Initial deposit: The government will deposit $1,000 into each account for qualifying newborns
  • Additional contributions: Parents and others can contribute up to $5,000 per year to the accounts
  • Tax treatment: The accounts are tax-advantaged, similar to 529 plans or Roth IRAs
  • Access: Funds can be accessed when the account owner becomes an adult

The program represents a significant experiment in government-supported wealth building. By giving every eligible child a $1,000 starter investment at birth, policymakers are attempting to create a more level playing field for wealth accumulation.

The Math Behind the Accounts

The potential impact of Trump Accounts is substantial when considering long-term compound growth. If a child born in 2025 receives the initial $1,000 deposit and their parents contribute the maximum $5,000 annually until age 18:

  • At a 7% annual return, the account would grow to approximately $225,000 by age 18
  • At a 10% annual return, the total would exceed $340,000

Even with just the initial $1,000 deposit and no additional contributions, the government seed money alone could grow to over $7,600 by age 18 at a 7% return.

Who Qualifies

The enhanced child tax credit applies to qualifying children who:

  • Are under age 17 at the end of the tax year
  • Are claimed as dependents on the taxpayer's return
  • Are U.S. citizens, nationals, or resident aliens
  • Have valid Social Security numbers

For Trump Accounts, eligibility is tied to children born during the program window (2025 through January 1, 2029). Additional eligibility criteria may apply, and families should consult IRS guidance for specific requirements.

Filing Considerations for 2025

If you have qualifying children, here's what you need to know for your 2025 tax return:

  • The $2,200 credit applies to the 2025 tax year (returns filed in 2026)
  • Continue to claim children as dependents as you have in previous years
  • The credit phases out for higher-income households, but thresholds remain generous
  • If your tax liability is less than your credit, you may qualify for the refundable ACTC

A Shift in Tax Policy Philosophy

The permanent child tax credit and Trump Accounts represent a meaningful shift in how the government approaches family finances. Rather than temporary measures subject to political winds, families now have a permanent framework for tax planning around children.

The Trump Accounts in particular signal a recognition that wealth building should begin early. By seeding investment accounts at birth, policymakers are acknowledging that compound returns over time are one of the most powerful forces for financial security.

As families plan for 2026 and beyond, these provisions provide a rare moment of certainty in an often unpredictable tax landscape. The child tax credit is here to stay, and a new generation of Americans will begin their financial journey with a government-provided head start.