The “One Big, Beautiful Bill” that meets President Donald Trump's legislative agenda and that the president signed into law on July 4, 2025, is expected to impact nearly every U.S. taxpayer and household.
The three areas in which the 900-page budget reconciliation and tax reform package affects Americans cover: taxes, federal health spending, and college savings.
The nation’s second-largest 401(k) plan provider, Empower, broke down in very simplistic and easy-to-understand terms how the bill may impact your personal finances.
Tax Cuts
The bill makes permanent the tax reductions Trump signed into law through the 2017 Tax Cuts and Jobs Act in his first term, which were set to expire at the end of 2025. These include the individual rate reductions, higher standard deductions, an alternative minimum tax, and a higher exemption for estate and gift taxes.
The bill offers taxpayers a new deduction on tips of up to $25,000 through 2028 as long as the taxpayer’s adjusted gross income does not exceed $150,000 for single filers or $300,000 for joint filers.
Overtime wages up to $12,500 ($25,000 for joint filers) are deductible through 2028.
The cap on state and local tax deductions, which, up until 2018, homeowners with mortgages filing itemized tax deductions had enjoyed, are raised from $10,000 to $40,000 for the next five years.
Senior citizens age 65 and older who earn less than $75,000 a year ($150,000 for couples) get an additional $6,000 standardized deduction. This also runs through 2028.
The bill raises the child tax credit of $2,000 to $2,200 and starts to index this credit for inflation beginning in 2026.
Taxpayers can now deduct up to $10,000 of interest on loans for passenger cars.
Health Coverage
The 71.4 million people enrolled in Medicaid are now subject to work requirements. Most of these people will now need to show documentation that they are working, studying, or attending school for at least 80 hours each month. In some cases, volunteering can qualify. Others may meet standards for an automatic exemption.
Health Savings Accounts, which have only been available to those whose sole health insurance coverage is through a high-deductible health plan, are now extended to those owning catastrophic medical insurance coverage or a “Bronze Level” plan purchased under the Affordable Care Act.
College & Continuing Education
The bill raises the use of 529 College Savings Plans qualified tuition expenses for grades K-12 from $10,000 to $20,000. It also permits books, online learning materials, and tutoring services to qualify for 529 coverage.
The bill also permits 529 funds to be used for several post-secondary educational expense costs, such as tuition, fees, books, supplies, and equipment for credentialed programs. Anyone incurring fees to earn a post-secondary school credential or for continuing education requirements can also use 529 funds.
Finally, the OBBB introduces Trump Accounts, new tax-deferred savings options for children under the age of 18. In the initial pilot program through 2028, the U.S. government will grant each child a $1,000 nest egg.
Parents and others can contribute up to $5,000 a year into the Trump Account, and even employers can contribute, up to $2,500 a year.
The funds must be held in low-cost index funds tracking U.S. equities, and the expense ratios cannot exceed 10 basis points, or 0.10%.
The bill also expands support for ABLE accounts, which are tax-advantaged savings programs for people with disabilities, and it, once again, permits people who take a standardized deduction to deduct an additional $1,000 a year ($2,000 for joint filers) for any charitable contributions.
Lee Barney ✉
Lee Barney, Newsmax’s financial editor, has been a financial journalist for 30 years, covering the economy, retirement planning, investing and financial technology.
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