Last updated on August 4th, 2025
The recently passed budget reconciliation bill, entitled the One Big Beautiful Bill Act (OBBBA), implements several new tax and spending policies and extends many policies previously set to expire. The OBBBA contains hundreds of provisions applying to individuals, businesses, and federal programs. Policies affected range from tax rates and incentives to healthcare programs to defense spending, and more. RBT CPAs has been assessing the impact of the OBBBA across the industries we serve. This article highlights some of the key provisions of the One Big Beautiful Bill Act impacting K-12 education, both directly and indirectly.
Changes to Medicaid
The OBBBA makes several significant changes to Medicaid programs, including a new requirement that able-bodied adults aged 19 to 64 enrolled in Medicaid must spend at least 80 hours per month working or participating in other qualifying activities (i.e., community service, job training, educational programs) to maintain eligibility. Certain exemptions apply, including for pregnant women, caregivers of young children, and individuals with specific qualifying medical conditions. The legislation also reduces Medicaid eligibility based on legal status. An individual’s eligibility must now also be reassessed by states at least every 6 months.
Additionally, according to estimates released by the Congressional Budget Office (CBO), the OBBBA is projected to reduce federal health spending by approximately $1 trillion over the next decade. CBO estimates that these cuts will increase the number of people without health insurance by 10 million by 2034.
Not only do many K-12 students throughout the U.S. rely on Medicaid for health insurance, but many school districts also rely on Medicaid funding to support health services for students from low-income families. The stricter eligibility requirements and funding cuts imposed by the OBBBA are expected to result in many students losing access to health insurance as well as a reduction in school-based health services.
Changes to SNAP
The new legislation also imposes steep cuts to the Supplemental Nutrition Assistance Program (SNAP), as well as stricter eligibility requirements for recipients. As a result, many families are predicted to lose access to government-funded food assistance.
Increased Child Tax Credit
The OBBBA permanently increases the Child Tax Credit (CTC) to $2,200 per qualifying child under the age of 17, effective for tax year 2025 and indexed annually for inflation. The maximum refundable portion has been raised to $1,700, also adjusted annually for inflation. At least one parent and all qualifying children must possess valid Social Security numbers in order to qualify for this credit.
Expansions to 529 Education Savings Plans
The OBBBA expands permitted uses of funds in 529 education savings plans by broadening the definition of “qualified expenses.” Beyond tuition, tax-exempt distributions from 529 savings plans can now apply to additional expenses related to enrollment in private, public, or religious elementary or secondary schools, including books, materials, testing fees, tutoring costs, dual enrollment fees, and educational therapies. The OBBBA also increases the annual limit for 529 account distributions for K-12 expenses from $10,000 to $20,000.
Federal School Voucher Program
Beginning in 2027, individual taxpayers can claim a dollar-for-dollar tax credit of up to $1,700 for gifts to qualified K-12 Scholarship Granting Organizations (SGOs) operating in states that have elected to participate. SGOs distribute these donations through scholarships for students enrolled in private schools. Many in the education space are concerned that this federal tax incentive created by the OBBBA will divert taxpayer money away from public schools to private schools.
Questions and Further Guidance on the OBBBA
The OBBBA is an expansive piece of legislation enacting many significant policy changes, several of which will impact public school districts, families, and students. Please note that IRS guidance on the new legislation is still forthcoming. RBT CPAs will continue to provide updated information to clients as more detailed guidance is issued. In the meantime, if you have questions regarding the recent tax law changes, please don’t hesitate to reach out to our experts at RBT CPAs. And as always, RBT CPAs is here to support all of your school district’s accounting, audit, tax, and advisory needs. Contact us today to find out how we can be Remarkably Better Together.