Every year brings new changes, especially when you’re in the thick of raising a young family. From first day of kindergarten and countless lost teeth, to milestones like bike riding or a driver’s license(!), the nuances of your family can feel entirely different than just last year. Some families reading this have even welcomed a new baby to begin the journey all over again.
Taxes also change year over year. Staying on top of recent changes can help make it easier to understand what’s new on your tax return and take advantage of any tax deductions or credits that may apply to your family.
In addition to the regular updates that the tax code goes through most years, the One Big Beautiful Bill Act (OBBBA) was signed into law in July 2025. This bill made several tax changes introduced in the 2017 Tax Cuts and Jobs Act permanent, and it also introduced several new tax changes.
We’ll walk you through some of the bigger changes that may affect many families with children.
First, a couple definitions:
What Are Tax Credits and Deductions?
Tax credits and deductions can both lower the overall amount of taxes you’ll pay, but they work differently from each other.
A tax credit directly reduces the dollar-for-dollar amount of tax you’ll pay. If you qualify for a $2,200 tax credit (like the Child Tax Credit), you would pay $2,200 less overall in taxes.
By contrast, a tax deduction reduces the amount of your taxable income. Let’s say you qualify for a $5,000 deduction. That $5,000 gets removed from the portion of your income that’s subject to tax. If you’re in the 22% tax bracket, that calculates to a reduction of $1,100 in your tax bill.
You have two options when claiming deductions on your tax return: itemize your return to claim any applicable deductions you can qualify for, or take the standard deduction.
Standard Deduction vs. Itemizing
Which tax filing option is right for you depends on what deductions you qualify for.
The standard deduction is simpler and involves less paperwork, whereas itemizing your tax return may involve keeping detailed records and receipts. For many families, the choice between itemizing or claiming the standard deduction may come down to which will result in a lower tax bill (or a higher refund).
Some tax preparation software programs will help guide you through comparing totals for your situation and help you decide which option may save you more. A tax professional can also help you make sense of the options and consider which is right for you.
You might consider itemizing if you qualify for significant deductions through charitable giving, mortgage interest on your home, or state and local taxes, or if you have large amounts of unreimbursed medical or dental expenses. Other families may find that the standard deduction offers a greater reduction in overall tax liability and is more convenient.
Update #1: Standard Deduction Amount
For tax year 2025 (the taxes you file by April 15, 2026), the standard deduction is $31,500 for married couples filing jointly and $15,750 for single filers or married individuals filing separately.
For tax year 2026, the standard deduction increases to $32,200 for married couples filing jointly and $16,100 for single filers.
Update #2: State and Local Tax (SALT) Deduction
The OBBBA substantially increases the deduction for state and local taxes (SALT). Previously, the SALT deduction was capped at $10,000. The new cap is $40,000, effective for tax year 2025, and it includes local income, sales and property taxes. The cap will increase by 1% each year until 2029, and then will revert back to a $10,000 cap. This deduction applies to taxpayers earning up to $500,000.
You cannot claim a SALT deduction if you claim the standard deduction. If you are considering whether itemizing deductions is right for you, you may want to factor in what amount of a SALT deduction you could claim.
Update #3: Child Tax Credit Changes
The Child Tax Credit has increased to $2,200 per qualifying child under age 17. To qualify, the child has to be a dependent on your tax return and live with you for more than half the year. Your children (including stepchildren and eligible foster children) and some other close relatives like siblings, half-siblings, grandchildren and nieces and nephews might be qualifying children for tax credits if you support them financially.
If you have other dependents who don’t meet the criteria for the Child Tax Credit, you may still be able to claim the Credit for Other Dependents, which offers a maximum credit amount of $500 per dependent.
Maximum credit amounts are available depending on your income. If you earn more than $200,000 (or $400,000 as a married couple filing jointly), you may be eligible to claim a partial credit.
Seventeen states and the District of Columbia also offer child tax credit programs. For example, Georgia introduced a new child tax credit for $250 for children under age 6, as well as expanding several other tax credits that can apply to child and dependent care expenses and foster families.
Update #4: Tip and Overtime Pay Deductions
A major change introduced through the OBBBA affects how the IRS treats tips and overtime pay. Previously, tips were subject to federal income tax. The change is retroactive, so starting tax year 2025, you can deduct qualified tips up to $25,000. The deduction phases out for people whose modified adjusted gross income is over $150,000 ($300,000 for joint filers).
Qualified tips includes voluntary cash or charged tips from customers, including shared tips. Automatic gratuity charges would not count (the IRS treats these more like a service fee).
Another retroactive change is a new deduction for overtime pay. Taxpayers can deduct the part of their qualifying overtime pay that exceeds the regular rate of pay. For example, if your employer pays “time and a half” for overtime hours, you’d deduct the “half” portion, or one-third of the overall overtime pay, to find the qualifying overtime compensation for the deduction. The maximum annual deduction is $12,500 ($25,000 if you’re filing jointly), and it phases out once your modified adjusted gross income reaches $150,000 (or $300,000, for joint filers).
There’s additional guidance for how these deductions may apply in different situations, such as if you are self-employed or earn over a certain amount. Check rules and guidance carefully to help determine what deductions may apply in your case.
Update #5: Clean Energy Credit Elimination
New tax changes under the OBBBA eliminate a former tax credit for buying an electric vehicle, but you may still be able to claim a credit. If you purchased a new electric vehicle before September 30, 2025, you may qualify for a clean vehicle tax credit of up to $7,500, or $4,000 if you bought a used electric vehicle.
Similarly, the Energy Efficient Home Improvement Credit and Residential Clean Energy Credit are expiring, but you may still be able to claim applicable credits for expenditures or improvements made before December 31, 2025.
Update #6: Earned Income Tax Credit (EITC) Amounts
Individuals and families earning under a certain amount of income may qualify to claim EITC. This may reduce the taxes you owe or increase the amount of tax refund you qualify for.
You need to meet requirements for maximum adjusted gross income and investment income to qualify. Limits depend on how many dependents you claim and whether you’re filing separately or as a married couple, so check the income table to see if you qualify. The investment income limit is $11,950.
For tax year 2025 (the tax return due April 15, 2026), the maximum credit amounts are:
Zero qualifying children: $649
One qualifying child: $4,328
Two qualifying children: $7,152
Three or more qualifying children: $8,046
When it comes to tax credits and deductions, every little bit helps. Review tax changes closely and consider working with a tax representative to help you learn about and claim any tax benefits that apply to you.
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