Trump Signs Sweeping New Tax and Spending Bill: What It Means for Your Wallet
President Donald Trump has signed into law a massive new tax and spending bill, marking one of the most significant overhauls to federal fiscal policy in recent history.
The legislation extends the tax cuts originally passed in 2017, introduces new financial incentives for families and seniors, and cuts into safety net programs like Medicaid and food stamps.
Here’s a breakdown of what’s in the bill and how it could affect you.
Key Takeaways
Makes 2017 tax cuts permanent
Expands deductions for seniors, families, and residents of high-tax states
Introduces new breaks for tip income, auto loans, and overtime pay
Cuts over $1 trillion from Medicaid
Reduces food assistance benefits under SNAP
1. 2017 Tax Cuts Made Permanent
Originally set to expire after 2025, the tax breaks passed during Trump’s first term are now permanent. This includes lower income tax rates, an expanded standard deduction, a higher estate tax exemption, and tax relief for pass-through businesses.
New increases under the latest law include:
Standard deduction increases to $15,750 for single filers and $31,500 for joint filers in 2025
Estate and gift tax exemption rises to $15 million for individuals and $30 million for couples in 2026
Child tax credit climbs to $2,200 per child, with $1,700 refundable
All figures will be indexed for inflation
These provisions mainly benefit middle- and higher-income earners who pay federal income tax. Without these changes, the Tax Foundation estimated that over 60 percent of taxpayers would have seen a tax hike in 2026.
2. SALT Deduction Temporarily Expanded
The state and local tax (SALT) deduction cap, originally limited to $10,000 under the 2017 law, will temporarily increase to $40,000 starting in 2025. However, this change phases out for individuals with income over $500,000 and will return to the $10,000 limit in 2030.
This provision primarily benefits taxpayers in high-tax states like New York, New Jersey, and California, where average SALT deductions already approach or exceed the current cap. Analysts caution that this adjustment mostly helps upper-middle-class households, as lower earners are less likely to itemize their deductions.
3. Child Tax Credit Increases, but Leaves Out Many Low-Income Families
Starting in 2025, the child tax credit will rise to $2,200, and the refundable portion will increase to $1,700. These amounts will also adjust for inflation beginning in 2026.
However, the credit continues to exclude many low-income families who don’t earn enough to claim the full benefit. According to the Urban-Brookings Tax Policy Center, as many as 17 million children in low-income households will not see any additional help.
4. New Senior “Bonus” Deduction
The bill introduces a temporary enhanced deduction of up to $6,000 for taxpayers aged 65 and older. To qualify, individuals must have income below $75,000 (or $150,000 for married couples filing jointly). The deduction phases out above those income levels and will be available from 2025 through 2028.
This provision is intended to help older Americans defray taxes on Social Security benefits. However, it is a limited alternative to the Trump administration’s earlier proposal to eliminate those taxes altogether—a move blocked by budget rules.
5. Cuts to Medicaid
The legislation includes about $1 trillion in cuts to Medicaid, affecting over 70 million Americans who rely on the program for health coverage.
Key changes include:
New work requirements: Adults aged 19 to 64 must work at least 80 hours per month, starting in late 2026
Stricter eligibility checks: States must verify eligibility every six months, up from once per year
Limited exemptions: Parents must have children age 14 or younger to qualify for exemption from work requirements
The Congressional Budget Office estimates that about 7.8 million people could lose Medicaid coverage by 2034 due to these changes.
6. Reduced Food Stamp Benefits Under SNAP
The Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, will also see significant reductions.
Key provisions include:
Expanded work requirements for adults aged 55 to 64 and parents of children 14 and older
Eligibility restricted to U.S. citizens and lawful permanent residents
States must now contribute a portion of SNAP funding; failure to do so may lead to reduced benefits or state withdrawal from the program
According to the Urban Institute, around 5.3 million families could lose an average of $146 per month in SNAP benefits.
7. Trump Accounts for Child Savings
A notable new feature of the legislation is the creation of “Trump accounts” — tax-advantaged savings accounts designed to help children build long-term financial security.
Under the law, children born between 2025 and 2028 will receive a one-time $1,000 federal deposit into a Trump account. These accounts are available to all U.S. citizen children and are intended to function as early wealth-building tools for future generations.
Key features include:
Parents can contribute up to $5,000 per year
Employers may also contribute up to $2,500 per employee’s child, with contributions excluded from taxable income
Account balances are invested in a diversified fund that tracks a U.S. stock index
Earnings grow tax-deferred, and qualified withdrawals are taxed as long-term capital gains
Supporters of the plan argue that Trump accounts will introduce more families to the benefits of compound investment growth and promote financial literacy from a young age. Republican lawmakers have framed the accounts as a way to help working-class families build intergenerational wealth.
However, some financial experts have noted that existing vehicles like 529 college savings plans may offer more generous contribution limits and tax advantages, depending on a family's goals.
Still, the Trump account represents a new approach to child-focused financial policy — one that blends direct government support with market-based investing tools.
Final Thoughts
Trump’s new tax-and-spending bill brings significant changes that will affect a wide range of Americans in different ways. Many taxpayers—especially middle-income families, seniors, and residents of high-tax states—may benefit from enhanced deductions, an expanded child tax credit, and a more predictable tax structure going forward.
The legislation’s permanent extension of the 2017 tax cuts offers greater stability for households and businesses planning their financial futures. Seniors could see modest tax relief through the temporary bonus deduction, and families raising children may gain from the slightly larger and inflation-adjusted child credit.
At the same time, the bill includes major reforms to Medicaid and food assistance programs, aimed at controlling long-term federal spending and encouraging more work participation among beneficiaries. These changes are likely to spark continued debate about how best to balance fiscal responsibility with support for vulnerable populations.
While the impact will vary depending on income, location, and individual circumstances, the bill reflects an attempt to shape the tax code and federal programs around a new set of priorities. As the provisions take effect in the coming years, Americans will begin to see how those changes play out in their daily lives and finances.
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This material was written in collaboration with artificial intelligence (ChatGPT) and derived from sources believed to be correct.
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