Trump’s One Big Beautiful Bill (OBBB) is the most important piece of tax legislation since the Tax Cuts and Jobs Act from 2017. Almost everyone will be impacted by the bill to some extent and there are some clear winners and losers. The easiest way to make sense of the many provisions is to look at how various categories of individuals are impacted. Let’s dive in.
The Winners
High Income Households:
High income households are one of the biggest beneficiaries even though it won’t feel very different. The new bill makes the lower tax rates permanent. Without the OBBB, the income tax rates would have reverted to prior levels from 2017 (see table below). The highest income tax bracket would have risen from 37% to 39.6%. These lower brackets will also help middle-income households, but the greatest dollar savings will go to the highest income households. However, the reason this won’t feel very different is that while it represents a lower rate vs 2017 it simply maintains the status quo as compared to 2024.
Large Estates:
The higher level of estate tax exemptions from the Tax Cuts and Jobs Act of 2017 was also scheduled to expire. Without the OBBB, the estate tax exemption would have likely fallen to about $7 million per individual in 2026 (from about $14 million per individual in 2025). The OBBB permanently increases the exemption to $15 million per individual in 2026, and will index this to inflation in future years. This will shelter millions of dollars more per individual from estate taxes, but again won’t feel different as it largely maintains the status quo.
Seniors:
While much of the spin around the Big Beautiful Bill advertises it as “eliminating federal income taxes on Social Security benefits for most beneficiaries” (including an email from the Social Security Administration that includes that very sentence), the reality is somewhat different. Rather than eliminating taxes on Social Security benefits, what the bill actually does is increase the threshold at which benefits become taxable. This is accomplished by giving a larger standard deduction to seniors. For individuals over 65, the new bill provides for a deduction of up to $6,000 per individual and up to $12,000 per married couple. This deduction starts phasing out at $75k in income for individuals and $150k for couples and is eliminated at $175k of income for individuals and $250k for couples. All seniors (who meet the income requirements) will benefit regardless of whether they are claiming social security. This benefit is only available from 2025 through 2028.
Parents:
The maximum child tax credit increases by $200 from $2,000 to $2,200 in 2025 and will be permanently indexed to inflation.
The maximum dependent care FSA contribution is scheduled to get a much-needed boost to $7,500 in 2026 from $5,000 currently. (Fun Fact: the previous $5,000 deduction feels woefully inadequate compared to childcare costs because the $5,000 deduction has not been adjusted for inflation since 1986!)
The bill also establishes Trump Accounts and will contribute $1,000 per child born between 2025 and 2028. Parents can also contribute $5,000 per year into Trump Accounts with after-tax dollars that grow tax-deferred. If used on eligible expenses (higher education, starting business, buying first home), the money can be taken out between age 18 and 30 after paying taxes at favorable long-term capital gains rates. These tax benefits are underwhelming and most existing retirement accounts and 529 options are likely a better choice.
Tax Payers with High State Income and/or Property Taxes:
Tax payers who have greater than $10,000 of state income taxes and/or property taxes and claim itemized deductions have been limited to deducting only $10,000 for their state and local tax (SALT) deduction. This SALT cap is now increased to $40,000 starting in 2025 and lasts for 5 years. This will clearly benefit taxpayers in high tax states like California, but it could also help homeowners in Texas whose property taxes exceed $10,000 per year. This increased deduction starts phasing out for households with more than $500,000 in income.
Tip Earners:
People who traditionally earn tips (servers, hairstylists, etc.) now receive a deduction of up to $25,000 per return for qualified tip income. This deduction phases out for individuals with income in excess of $150,000 and married couples with income in excess of $300,000.
Overtime Workers:
Individuals who get paid for overtime can now deduct up to $12,500 per individual and $25,000 per couple for qualified overtime compensation. Like the tip deduction, this phases out for individuals with income in excess of $150,000 and married couples with income in excess of $300,000.
Car Buyers Who Finance:
Car buyers can deduct up to $10,000 per year in interest paid on qualifying auto loans. This only applies to new cars whose final assembly occurs in the United States. This deduction phases out for individuals with income greater than $100,000 and couples with income greater than $200,000. This is a temporary deduction that expires in 2028.
The Losers
Medicaid Recipients:
The biggest cuts in the bill are focused on Medicaid. The bill introduces work requirements and also makes it more difficult for states to fund Medicaid. Millions are expected to lose Medicaid coverage as a result.
SNAP (Food Stamp) Recipients:
The bill is projected to cut $186 billion from SNAP benefits over 10 years according to the Congressional Budget Office. This will involve expanded and stricter work requirements and also increased state cost-sharing.
Future Student Loan Borrowers:
The new bill moves away from income-driven repayment plans towards more restrictive repayment plans. The illustration below shows that payments are significantly higher across the board for borrowers of all income levels when compared to the Biden administration SAVE plan. The new bill also eliminates Grad PLUS Loans and puts caps on Parent PLUS Loans.
Healthcare Exchange / ACA Subsidies:
One key provision that OBBB did not extend was the enhanced premium tax credits which are scheduled to expire after 2025. This means that many households will face increased healthcare exchange insurance premiums as the premium tax credits are reduced starting 2026. Most significantly, this will mark the return of the subsidy cliff. Middle-income households will again lose all premium subsidies once their incomes surpass 400% of the federal poverty level.
Electric Vehicle Buyers / Manufacturers:
The current $7,500 credit for the purchase of new electric vehicles will be eliminated as of 9/30/25. The $4,000 credit for used EVs are also being eliminated at the same time. The tax credit for installing EV charging stations is also set to expire in 2026.
Charitable Donors Who Itemize:
The OBBB introduces a 0.5% of Adjusted Gross Income (AGI) floor for individual charitable contribution deductions. This means that you can only claim charitable contribution deductions as part of your itemized deductions if they exceed 0.5% of your AGI. For example, if your household AGI is $400k, then 0.5% would be equal to $2k. So if you normally give $3k in charitable donations each year, you would only be able to deduct $1k (calculated as $3k less the $2k floor).
Immigrants:
The bill eliminates Medicaid and SNAP eligibility for lawfully present non-citizens (refugees and asylees). There is also a new 1% tax on remittances sent broad. The bill also increases funding for immigration enforcement and deportation.
Future Generations:
The OBBB is projected to increase government deficits by $3 to $4 trillion dollars. While it is unclear when the debt problem becomes a debt crisis, it is clear that heavy deficit spending cannot continue indefinitely. At some point, future generations will have to pay the bill for these tax cuts.
