Welcome back to the One Big Beautiful Bill (OBBB) breakdown series—where we turn slices of this 900-page legislation into insights you can actually use.
In Part 2, we’re continuing to explore tax changes for 2025 that directly impact how military families save, spend, and plan for the future. From baby savings accounts to bigger deductions and added education flexibility, these updates could help you make smarter financial decisions in the years ahead.
Let’s take the next bite…
1. Trump Accounts
These new savings vehicles are designed for kids—offering tax-deferred growth without income limits or specific usage rules. Think of them like IRAs for minors, but more flexible.
Key Details:
- Government Seed Money: $1,000 for qualifying children*
- Annual Contribution Limits:
- $5,000/year from family (non-deductible)
- $2,500/year from employer
- Eligibility:
- Children born between December 31, 2024, and January 1, 2029*
- Or any U.S. citizen under 18 with a Social Security number
- Withdrawals: Penalty-free starting at age 18 (subject to capital gains)
- Inflation Adjusted: Yes (contribution limits)
- Income Limits: None
- Effective Date: Begins in 2026
- Applicability: Above Average
Why it matters:
Um, free money—for babies born before January 1, 2029. Even if you never add a dime, that $1,000 growing at a 7% return becomes roughly $3,500 by age 18. A solid jumpstart toward adulthood.
*Note: Children born outside the designated window can still open accounts—they just won’t receive the $1,000 government contribution.
2. Dependent Care Flexible Spending Accounts (FSAs)
The OBBB increases the cap on Dependent Care FSAs, offering families more tax-efficient ways to pay for childcare.
Key Details:
- Contribution Limit: $7,500/year
- $3,750 if Married Filing Separately
- Inflation Adjusted: No
- Effective Date: 2026
- Applicability: Above Average
Why it matters:
Childcare isn’t cheap—especially for dual-military or single-parent households. This change lets families set aside more pre-tax dollars for daycare, preschool, and after-school care.
3. Expanded 529 Plan Usage
529 Plans now cover a broader range of educational expenses—not just traditional college tuition.
Key Details:
- Annual Withdrawal Limit: $20,000
- Eligible Uses Include:
- K–12 tuition, curriculum, and books
- Online resources and tutoring
- Dual enrollment courses
- Educational therapies
- Certificate and credentialing programs
- Effective Date: 2025 onward
- Applicability: Average
Why it matters:
The Post-9/11 GI Bill is a powerful benefit—but it doesn’t always cover everything, and not all families use it the same way. Expanded 529 flexibility helps fill in the gaps with tax-advantaged funds.
4. Personal Exemption Deduction (for Retirees)
This temporary deduction is aimed at older Americans—offering a modest tax break to those over 65.
Key Details:
- Deduction Amount:
- $6,000 for single filers
- $12,000 for married filing jointly
- Income limits where the deduction starts to phase out:
- Single: $75,000
- Married Filing Jointly: $150,000
- Eligibility: Age 65+
- Effective Date: 2025–2028
- Applicability: Below Average
Why it matters:
Retired military members—especially those living on a fixed income—could see some meaningful tax relief during this four-year window.
5. Mortgage Interest Deduction & Mortgage Insurance Premiums
The TCJA-era caps on mortgage interest deductions remain—but with new clarity around mortgage insurance premiums.
Key Details:
- Deduction Limits:
- Up to $750,000 in mortgage debt
- $375,000 for married filing separately
- Grandfathered limit of $1 million ($500,000 MFS) for mortgages originated before December 15, 2017
- Mortgage Insurance Premiums (MIPs):
- MIPs are now deductible again
- Income limits where the deduction starts to phase out:
- Single: $100,000
- Married Filing Separately: $50,000
- Effective Dates:
- Mortgage interest: 2025 onward
- MIPs: 2026 onward
- Applicability: Average
Why it matters:
For military families using VA loans, the VA funding fee is considered a mortgage insurance premium—meaning potential deductions are back on the table.
Final Thoughts
Some updates in the OBBB are big and bold—like $1,000 for newborns in a Trump Account. Others are more modest or temporary—like the personal exemption for retirees.
Here’s the bottom line:
Not every change will apply to every military family.
But every military family will feel the impact in some way.
At Black Dog Wealth, we’re here to help you navigate these changes with clarity and confidence—so you can focus on your family, your mission, and your next right financial step.
Disclaimer:
This article is provided for educational, informational, and illustrative purposes only. It does not constitute tax advice, investment advice, or a recommendation to buy or sell any security. The content is general in nature and may not apply to your individual circumstances. Please consult a qualified tax professional, financial planner, and/or legal advisor for guidance specific to your situation.