By Elizabeth O'Brien
The House of Representatives is nearing a vote on the One Big Beautiful Bill Act, a package of tax breaks, Medicaid cuts, and spending measures that will impact virtually every American.
While lawmakers are still wrangling over details, many of the measures taking shape would have a big impact on household and individuals' personal finances. Along with extending income-tax cuts passed in 2017, new tax breaks include an increase in the SALT deduction, an extra standard deduction for seniors, deductions for tipped wages, and MAGA accounts for kids. The House bill also aims to eliminate or reduce tax credits on electric vehicles and clean-energy programs and may impose annual fees on EVs and hybrids.
All of this will be costly. The tax provisions in the bill would increase the federal deficit by $3.8 trillion from 2026 to 2034, according to a preliminary analysis Tuesday night by the non-partisan Congressional Budget Office. To help finance the tax cuts, the legislation would cut Medicaid, which covers one in five Americans, by nearly $700 billion from 2026 to 2034, according to the CBO. It would also cut SNAP nutrition benefits by $267 billion over that time, the CBO projected.
Who will benefit the most? Mainly households with higher incomes. Under the House version of the bill, more than 80% of households would get a tax cut in 2026, according to an analysis by the Urban Institute & Brookings Institution Tax Policy Center. But 60% of the cuts would go to the top one-fifth of households, and more than one-third would go to those making $460,000 or more, according to the report.
This isn't set in stone. While the House may soon vote on its version of the bill -- which isn't guaranteed to pass -- the next step would be for the Senate to weigh in. Changes are almost certainly coming. The House may then vote on the Senate version and send it to President Trump to sign into law.
Here are some major provisions under consideration that could affect your wallet:
Extension of the 2017 Tax Cuts
The bill would make permanent the individual tax breaks in the Tax Cuts and Jobs Act of 2017, which are set to expire at the end of this year. The tax law from Trump's first term temporarily lowered most of the income-banded marginal tax rates, including the top rate of 39.6%, which fell to 37%. It also nearly doubled the standard deduction, or the amount that taxpayers can subtract from their income before owing taxes on the rest, causing many fewer taxpayers to itemize their deductions.
The 2017 law temporarily increased the estate and gift tax exemption, and the new legislation would make the increases permanent and set the exemption at $15 million for the tax year starting Jan. 1, 2026, adjusted upward for inflation in future years. The law would also make permanent the $2,000 increased child tax credit and would temporarily boost it by $500 per child from 2025 to 2028.
Raising the SALT Cap
To help finance its tax breaks, the 2017 law capped the state and local tax deduction at $10,000. This deduction allows taxpayers who itemize their deductions to reduce their federally taxable income by the amount they pay on state and local income and property taxes--up to the limit. Lawmakers are nearing an agreement on a permanent, $40,000 SALT cap, The Wall Street Journal reported. The cap would begin phasing out at incomes of $500,000, according to the report.
Misc. New, Temporary Tax Breaks from 2025 to 2028
The bill would eliminate taxes on qualifying tips and overtime pay through 2028. Both would take the form of a deduction for taxpayers regardless of filing status, and the U.S. Department of the Treasury would need to provide guidance on the implementation so, for example, people don't try to re-characterize non-tip income as tip income to take advantage, says Stephen Eckert, a partner in the national tax office of Plante Moran in Chicago. Also included is a provision that would allow qualifying taxpayers to deduct car loan interest for cars with final assembly in the U.S. It would be phased out for taxpayers beginning at $100,000 of adjusted gross income.
Extra Standard Deduction for Seniors
Trump campaigned on eliminating taxes on Social Security income, but instead the bill would provide an extra standard deduction of up to $4,000 per individual age 65 and over from 2025 to 2028. It begins to phase out over $150,000 for married taxpayers filing jointly and $75,000 for individual filers.
MAGA Accounts
The bill provides a new kind of tax-preferred account for children called the Money Account For Growth & Advancement. Beneficiaries would have to be under age 8 when they are created, and distributions wouldn't be allowed until age 18. Unlike distributions from traditional 401(k) plans, which are taxed at ordinary income rates, distributions from MAGA accounts would be taxed at lower, capital gains rates, Eckert says. The government would also start a pilot program to allow taxpayers to claim a $1,000 credit for opening up an account for a U.S. citizen born after Dec. 31, 2024 and before Jan. 1, 2029.
EV Credits
The bill would eliminate or substantially reduce tax credits for clean energy and electric vehicles. It would also impose annual fees of $250 a year for covered electric vehicles and $100 for covered hybrid vehicles.
Retroactive Disaster Loss Credits
This provision would allow eligible taxpayers who suffered natural disaster losses from January 2020 onwards to retroactively claim a credit for them. Currently, those credits are limited to amounts not covered by insurance that exceed 10% of a taxpayer's adjusted gross income, but the bill would remove that threshold for qualifying disaster losses incurred from Jan. 1, 2020, until 60 days after the bill's enactment.
Write to Elizabeth O'Brien at elizabeth.obrien@barrons.com
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May 21, 2025 14:21 ET (18:21 GMT)
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