10 ways the Trump tax bill could affect your money

Boston Globe

22-05-2025

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Here are 10 ways it could affect your finances.
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Your tax rate won't go up
During President Donald Trump's first term, Republicans ushered in across-the-board cuts for individual and corporate tax rates. But the individual rates are set to expire at year's end, which means most households would see higher tax bills next year unless lawmakers act. Neither party wants a tax increase for middle-income households; this bill would keep the tax rates at their current level while raising the standard deduction to $16,000 for individuals and $32,000 for couples.
Between the extension of the lower rates and new tax breaks in the bill, the average household would save $2,900 in 2026, according to an analysis by the Tax Policy Center. While 8 in 10 households would see a break, it estimated that the top 20 percent of households would get the lion's share of those gains.
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'This is what 77 million Americans voted for,' Rep. Jason T. Smith (R-Missouri) said early Thursday during the House debate.
Democrats countered that even if lower-income families have lower tax bills, some will end up worse off in total because of cuts to social service programs.
If you're a parent, you might get a bigger tax credit
The bill would raise the maximum child tax credit by 25 percent to $2,500 per child, an increase that would extend to roughly three-quarters of households with enough income to qualify. The full credit would not be available for the lowest-income households, but would be for parents earning up to $400,000 per year. The credit would hold at $2,500 for four years, then rise with inflation starting in 2029. Some 40 million households claimed the credit in 2024.
However, undocumented immigrants would no longer qualify for the child credit, even if their children are U.S. citizens. Congressional staff estimates say this change will disqualify the parents of 2 million American kids from claiming it.
If you're older than 65, you might get a bigger deduction
Senior citizens already can take a larger deduction off their taxable income. The bill would increase that another $4,000 for seniors
whose adjusted gross income is less than $75,000 (or $150,000 for a couple) for the next four years.
If you're a gig worker or entrepreneur, you might get a break
The 2017 law created a 'pass-through' deduction for certain types of business income. The benefit goes to people with income that is
not salary-based, such as freelancers, Uber drivers, multimillionaire business owners, and partners in legal, accounting or medical practices.
The new bill passed by the House would raise that deduction from 20 to 23 percent.
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Most of the money goes to high earners. An analysis by the Tax Policy Center found that just 1 in 100 households in the lowest income quintile benefited from the deduction, while 1 in 4 in the top quintile benefited. It calculated that 89 percent of the benefit went to the top 20 percent of households, with more than half going just to the top 1 percent (and half of
that
going to the top 0.1 percent).
Your overtime pay or tips might not be taxed
The bill attempts to make good on several of Trump's campaign promises, including no tax on tips for specific industries such as food service and hair and nail care, and
no tax on overtime pay for many workers.
Although many economists deride the idea of not taxing tips, the proposal has caught fire among politicians since Trump floated it on the campaign trail. This week, it passed the Senate unanimously as a stand-alone bill, making it one of the most likely components of the sprawling House measure to eventually become law.
If you're on Medicaid, you could pay more or even lose it
Under President Joe Biden, the number of people receiving health-care through the national insurance program for the poor covered 1 in 5 Americans, its highest level ever. Republicans would finance some of their tax cuts by cutting Medicaid spending by $715 billion, which is one of the most controversial parts of Trump's bill.
The legislation would require Medicaid recipients living above the federal poverty line to start paying part of their health-care costs, add work requirements for many able-bodied childless adults, increase processes for recipients to verify their eligibility and more.
The Post has reported that the nonpartisan Congressional Budget Office predicts the plan would cause 8.7 million people to lose their Medicaid benefits.
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In some states, you might lose food stamps
The bill would require 28 states to pay a larger share
of the cost of providing and administering SNAP benefits. States would have to choose whether to come up with the money or cut benefits.
Due to the cuts to Medicaid and SNAP, the nonpartisan Congressional Budget Office says that low-income Americans would see a decline in their total household finances because of this bill, even with a small tax cut.
'We could be working to help Americans deal with the high cost of living,' Rep. Terri A. Sewell (D-Alabama) said during Thursday's debate. Instead, she said, the bill is mostly a giveaway to the rich. 'We'll pay for it by [taking] SNAP benefits from hungry families.'
Your student loans will be less likely to be forgiven
While Biden didn't achieve the most ambitious version of his plan for wiping
out student debt for millions of Americans, he did create loan forgiveness programs for many borrowers. The Republican bill would roll that back, saving the government $295 billion over the next decade.
You might get more relief from high state taxes
Stay tuned on state and local tax deductions, one of the most hotly contested and fluid parts of bill negotiations. If a version of this bill passes the Senate, the legislation will almost certainly increase the amount of state and local taxes that can be deducted from filers' federal taxable income. But the specific level remains in question, with critics pointing out that the proposition is costly and largely benefits high earners in certain high-tax states.
The first draft proposed raising the cap from $10,000 to $30,000, but some Republicans from states with high taxes, like New York, said they wouldn't support a bill unless the deduction increases. The measure passed Thursday would raise the cap to $40,000 in 2025 for taxpayers earning less than $500,000, and increase the cap and income limit by 1 percent annually for the next 10 years.
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You won't be able to claim tax credits for buying an EV
Republicans are rolling back many Biden-era tax incentives for confronting climate change, including the credit of as much as $7,500 for buyers of electric vehicles.