Why Should Educators Be Happy About the OBBBA?

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces sweeping changes across tax policy, employee benefits, education funding, and savings programs. For educators specifically, there are several provisions that offer new opportunities and resources, particularly in areas such as school choice, tax-advantaged savings for children, and expanded workplace benefits.

Blocks spelling 'TEACH' are arranged on a desk, with stacks of books in the background, symbolizing education and learning.

Key Provisions for Educators

1. Federal School Choice Tax Credit

• The OBBBA establishes a federal tax credit program for donations to Scholarship Granting Organizations (SGOs), which provide scholarships for K-12 educational expenses.

• Educators (and anyone else) can receive a dollar-for-dollar federal tax credit for donations (up to $5,000 or 10% of AGI).

• SGOs can use these funds for private school tuition, tutoring, dual enrollment, standardized test fees, and special education therapies.

• Scholarships prioritize low-income families (up to 300% of area median income), making private and alternative schooling more accessible for students who need it most.

  
  

2. Enhanced Employee Benefits for School Employees

• Health Savings Accounts (HSAs): Expanded eligibility, including those enrolled in bronze or catastrophic ACA plans and direct primary care arrangements.

• Dependent Care FSAs: Annual pre-tax limit increased to $7,500 for single/married joint filers and $3,750 for married filing separately.

• Student Loan Repayment: Employers can now permanently offer up to $5,250/year in tax-free student loan repayment benefits.

• Trump Accounts: New tax-advantaged savings accounts for children, with a $1,000 federal seed deposit for children born 2025–2028, and annual contributions up to $5,000. Employers (including school districts) can contribute up to $2,500/year per child.

  
  

3. Tax Changes and Deductions

• Estate and Gift Tax Exemption increased to $15 million per person.

• SALT Deduction Cap raised to $40,000 (through 2029), which may benefit educators in high-tax states.

• Charitable Deductions: New limitations for itemizers, but a standard deduction of $1,000 for non-itemizers.

  
  

What Should Educators Know and How Can They Take Advantage?

What to Know

• School Choice Scholarships: Educators should be aware that more families may pursue alternative schooling options due to increased scholarship availability. This could mean more diverse classrooms, new opportunities for specialized instruction, or changes in enrollment patterns.

• Employer Benefits: School employees should review their benefits packages for updates on FSAs, HSAs, and student loan repayment programs.

• Trump Accounts: Educators with young children or grandchildren can open these accounts to jumpstart long-term savings.

• Tax Planning: Changes to SALT and charitable deductions may affect take-home pay and annual tax strategies.

  
  

How to Take Advantage

| Action Item | Why It Matters |

|---------------------------------|----------------------------------------------------------------------------------------------------|

| Donate to SGOs | Receive a dollar-for-dollar federal tax credit, support scholarships for students, and potentially reduce your own tax liability. |

| Promote Scholarships | Inform students/families about new scholarship opportunities—especially those who may benefit from private, alternative, or special needs schooling. |

| Review and Maximize Benefits| Increase FSA/HSA contributions, take advantage of student loan repayment if your employer offers it, and consider Trump Accounts for your children. |

| Tax Planning | Consult with a tax advisor to optimize deductions and plan for new limits and opportunities. |

| Engage with School Leadership| Advocate for employer contributions to Trump Accounts or expanded workplace benefits for educators and staff. |

Summary Table: OBBBA Highlights for Educators

| Provision | Benefit for Educators | How to Use/Access |

|-----------------------------------|----------------------------------------------------------------|-------------------------------------------|

| School Choice Tax Credit | Direct tax benefit for donations; expands options for students | Donate to SGOs, promote to families |

| HSA/FSA Expansion | Greater pre-tax savings for health and dependent care | Adjust payroll elections |

| Student Loan Repayment | Permanent, tax-free employer contributions | Ask HR about program availability |

| Trump Accounts | Tax-advantaged savings for children | Open accounts for eligible children; encourage employer contributions |

| SALT/Charitable Deduction Changes | Potential for greater deductions (SALT), new deduction rules (charity) | Review with a tax professional |

Educators have new tools to support their own financial wellness and to help students access a wider range of educational opportunities. Be proactive: review your benefits, spread the word about scholarships, and consult with financial and tax advisors to make the most of these changes.

If you need tailored guidance for your educator clients or want to discuss specific scenarios, just let me know!