2 days ago
Donald Trump signs ‘One Big Beautiful Bill' into law. Who benefits the most? What's concerning?
US President Donald Trump signed his 'Big Beautiful Bill' of tax breaks and spending cuts into law Friday after his cajoling produced almost unanimous Republican support in Congress for the domestic priority that could cement his second-term legacy.
If your income falls below $58,000, you may lose access to key benefits like Medicaid, ACA health insurance subsidies, SNAP, and student aid.
For those earning under $20,000, this can mean a loss of up to $885 or 5.4% of income.
For those earning from $20,000 and $58,000, this can mean this can mean a loss of up to $1,090 or 2.3% of income.
For those earning from $58,000 and $105,000, this can mean this can mean a loss of up to $45 or 0.1% of income, according to the Penn Wharton Budget model.
Starting in 2026, the bill introduces a requirement for able-bodied adults aged 19–64 without dependents to work or participate in approved activities (like volunteering) for at least 80 hours per month to maintain Medicaid coverage. Recipients earning above the federal poverty level (roughly $15,500 for a single person) would face increased costs, with an additional $35 copays for certain medical visits.
Moreover, States will now be required to verify Medicaid eligibility every six months, instead of the current once-a-year schedule.
Medicaid funding would be cut off from any clinic, such as Planned Parenthood, that provides abortion services. The Congressional Budget Office estimates that 11.8 million people could lose Medicaid coverage over the next 10 years due to these changes, according to a report by USA Today.
The wealthiest households would see a $12,000 increase from the legislation, and the bill would cost the poorest people $1,600 a year, mainly due to reductions in Medicaid and food aid, according to the nonpartisan Congressional Budget Office analysis of the House's version.
Work requirements would now apply to adults ages 55 to 64, expanding beyond the previous limits. According to the Congressional Budget Office, a similar proposal in 2023 could have led to a reduction of 3 to 3.5 million people from the program. States would now be required to help fund food assistance benefits, shifting some of the financial burden from the federal government.
The bill raises the cap on the state and local tax (SALT) deduction, allowing taxpayers to write off up to $40,000, up from the previous $10,000 limit starting in 2025.
This higher cap applies to individuals with incomes up to $500,000 and will increase by 1% annually to account for inflation. However, the cap is scheduled to revert to $10,000 in 2029, according to a report by USA Today.
Additionally, the legislation revives a tax loophole for pass-through entities, enabling them to deduct state and local taxes and effectively bypass the SALT cap for individual owners.
Along with adjustments to the alternative minimum tax (AMT), these changes are projected to cost $325 billion over time, according to the Committee for a Responsible Federal Budget, USA Today reported.
The bill introduces a new tax deduction allowing car buyers to deduct up to $10,000 per year in car loan interest if the vehicle they purchase is made in the United States.
However, this deduction is gradually phased out for individuals earning between $100,000 and $150,000, and for joint filers with incomes between $200,000 and $250,000.
The bill provides an additional $6,000 tax deduction for individuals aged 65 and older, available through 2028. However, this extra deduction begins to phase out for seniors with incomes starting at $75,000.
The bill expands the estate tax exemption, allowing individuals to pass on up to $15 million to their heirs tax-free, preventing the current nearly $14 million exemption from expiring in 2025 and reverting to just over $7 million.
It also increases the child tax credit from $2,000 to $2,200, with the amount set to be adjusted for inflation starting in 2026.
The legislation introduced special savings accounts for children under age 8, providing each child with a $1,000 initial deposit. Families can contribute up to $5,000 per year tax-free to these accounts until the child turns 18, with the funds available for use after that age.
The bill introduces a graduated tax on endowments held by private colleges with at least 3,000 tuition-paying students. The tax rate increases with the size of the endowment per student: schools with endowments between $500,000 and $750,000 per student will face a 1.4% tax, those between $750,000 and $2 million will be taxed at 4%, and institutions with endowments exceeding $2 million per student will pay an 8% tax on their endowment earnings, according to a report by USA Today.
The bill boosts defence spending by $153 billion, which includes $25 billion allocated for the development of the 'Golden Dome' missile defence system and $7.5 billion for improving housing, health care, child care, and education for service members and their families.
The bill allocated a $150 billion increase in border security funding, with $50 billion dedicated to completing the wall along the southern border. It also sets aside $45 billion for the expansion and maintenance of detention centres, $8 billion to hire more immigration officers, and $27 billion to support and carry out deportation efforts.
The highest-earning 20% of Americans receive approximately 65% of the tax benefits from the extension of the Tax Cuts and Jobs Act (TCJA), while the remaining 80% get only about 35% of the advantages.
The tax cuts largely benefit high-income families, particularly those in the top 5%, who experience the greatest reductions relative to their after-tax income. Households in the 95th to 99th income percentiles enjoy average tax cuts equal to 3.0% of their after-tax income, whereas other groups receive smaller proportional gains.
The top 20% of American households by income receive about 65% of the total tax savings from the TCJA extension. This means if the total tax cut amounts to $100, the wealthiest 20% get $65 of that benefit.
The bottom 80% of households share the remaining 35% of the tax savings, so collectively they get $35 out of every $100 in tax cuts.
Other income groups receive comparatively smaller benefits. For example, middle-income households may see tax reductions amounting to around 1% or less of their after-tax income. For a family earning $75,000 after taxes, this would translate to a tax cut of about $750.
The wealthiest households would see a $12,000 increase from the legislation, while the poorest people could lose $1,600 a year.
Meanwhile, some lower-income households could end up worse off after 2027, as certain provisions expire or are offset by cuts to programs such as Medicaid or SNAP.
(With inputs from agencies and USA Today)
