A multi-trillion dollar tax and spending package has been advanced by House Republicans just last Thursday and it could have significant implications on the finances of millions of households.
The “One Big Beautiful Bill” Act, if enacted, could bring about new provisions aimed at significantly overhauling student borrowing, health savings accounts, and car ownership — in addition to making permanent the tax cuts Donald Trump had in place in 2017 during his first term in office.
By using “budget reconciliation”, the Republicans, with control of Congress, will be able to pass the package as it merely needs a straightforward majority in the Senate. The bill of over 1,000 pages, however, is more than likely to see some changes in the upper chambers before it is signed into law by the president.
Here is what to know about how these new provisions could affect your finances.
The “One Big Beautiful Bill” Act
“SALT” deduction limit
“SALT” is a $10,000 limit on state and local taxes enacted by the Tax Cuts and Jobs Act since 2017. Under the new bill, the SALT cap would be raised to $40,000 in 2025 meaning tax breaks for those earning over $500,000 would be phased out. The SALT limit and the income phaseout would both be increased by 1% starting in 2026 and ending in 2033.
Taxpayers in the 37% income tax bracket will also see a reduction in itemized deductions under the bill. As a result, the higher SALT cap benefits could be limited.
In an analysis, Garrett Watson, director of policy analysis at the Tax Foundation wrote, “Any changes to lift the cap would primarily benefit higher earners.”
Bigger child tax credit
Child tax credit had been temporarily boosted from $1,000 to $2,000 as part of Trump’s 2017 tax cuts. This is set to expire in 2025 if Congress takes no action. Under the new bill, however, the $2,000 credit would be made permanent and the cap would be raised to $2,500 from 2025 till 2028.
Unfortunately, this does “nothing for the 17 million children that are left out of the current $2,000 credit,” Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division, previously shared with CNBC.
Medicaid and SNAP cuts
Approximately $1 trillion in cuts to Medicaid health coverage and the Supplemental Nutrition Assistance Program (SNAP) has been included in the bill by House Republicans to help pay for tax relief.
The changes in the bill will result in stricter qualification requirements for the program and subsequently, “14 million individuals may lose health coverage, while 3 million households may go without food assistance,” according to Accountable.US.
Low to middle income seniors aged 65 and higher will be able to deduct an extra $4,000 on their tax returns under the new bill. This will apply to individual filers with a maximum $75,000 in modified adjusted gross income and joint filers with a maximum of $150,000.
Health savings account
“The legislation aims to both expand households’ ability to contribute to HSAs and to use those funds without financial penalty,” stated William McBride, chief economist at the Tax Foundation — with the measures coming into effect as of 2026.
Households could potentially use HSAs to cover sport and fitness bills as well, with a cap of $500 annually for individuals, and $1,000 for couples.
‘Trump Accounts’ for child savings
A new savings account for children with a once-off $1,000 deposit from the government will also be introduced under the tax package. The Department of Treasury “Trump Accounts” can be used at a later stage for education and college expenses, or even as a down payment for property or start-up capital for a business. Parents can contribute up to $5,000 annually and the balance will be invested.
Student loan benefits reduction
Subsidized federal student loans would be eliminated under the new bill. This means that interest on debt whilst the borrower is still studying would not be covered by the government going forward. According to higher education expert Mark Kantrowitz, “The change could increase a student’s loan balance at graduation by about 15%.”
Additionally, the tax package includes an interest deduction on car loans, and a tax break on tip income for those earning under $160,000. Tax breaks for those who purchase or lease electric vehicles will also face an early termination.