Congress has signed off on a $3.4 trillion legislative package featuring new tax breaks, spending cuts, and more funding for defense and immigration enforcement, delivering President Donald Trump his “big, beautiful bill” despite rumblings from fiscal hawks about the projected $4 trillion it could add to the national debt over the next decade.
The expansive bill will affect nearly every American, regardless of their stage in life or income level. Here’s how it looks:
Taxes: Middle-income seniors reaped one of the biggest tax breaks in the legislation — a new $6,000 deduction ($12,000 for a couple) for those 65 and older who earn as much as $75,000 per year (or $150,000 for a couple). The deduction decreases for higher earners, and it phases out altogether for singles who exceed $175,000 a year and couples after $250,000.
Health care: While many seniors rely on Medicare to cover their medical expenses, the federal health insurance program doesn’t cover long-term care. That means many older adults end up turning to Medicaid, the government health insurer for the poor, which covers more than 60 percent of the nation’s nursing home residents. The legislation’s deep cuts to Medicaid could force some nursing homes to shutter or scale back services, making it harder for seniors to find a spot in a facility.
The bill includes several new and enhanced benefits for households with children, including:
Child tax credit: The tax credit is now $2,200 per child and will increase with inflation each year. But noncitizens are now barred from claiming it, even if their children are U.S.-born. And the legislation doesn’t include any changes for those whose incomes are too low to qualify for the full child tax credit — which means about 1 in 4 children.
$1,000 for babies: The legislation creates a tax-deferred investment account on behalf of children born from 2025 through 2028. The government will seed each one with $1,000, while parents, employers and nonprofits may also contribute to the accounts.
Adoption and parental leave: The bill bumps up the tax credit for filers who adopt a child to $5,000, which will also grow with inflation. It also expands small programs for businesses that provide parental leave and workplace day care programs.
Tax cuts: Without this bill, temporary tax cuts passed during Trump’s first term would have expired at the end of this year — driving up taxes for most households. Instead, the legislation will raise the standard deduction to $15,750 for an individual and $31,500 for a married couple, and will maintain the lower tax rates set in 2017.
Benefit cutbacks: The bill includes big cuts to health care programs such as Medicaid and anti-hunger initiatives like the Supplemental Nutrition Assistance Program (SNAP). Medicaid recipients could lose their coverage if they do not meet the program’s new work requirements or fail to regularly submit documentation proving they are working, volunteering or attending school at least 80 hours a month. And those in low-income households who are exempt from the Medicaid work requirements could still lose their health insurance if they don’t submit paperwork proving their exemption, such as pregnancy, a disability or certain types of caregiving.
Taken together, low-income households stand to lose more in benefits than they gain in tax breaks. A single parent who earns $20,000 a year, for instance, might save about $750 in taxes but lose benefits worth more than $1,600.
Tax breaks: Families who don’t receive government assistance such as food stamps will mostly benefit from the tax cuts in the bill, including provisions to not tax certain overtime pay. Depending on where they live, some middle-income families will benefit from the higher limit on deducting state and local taxes from federal taxable income. After capping such deductions at $10,000 since 2017, the new bill raises that cap to $40,000 for households with income below $500,000, a boon to some families in high-tax states. But data shows that the SALT cap has always affected the rich much more than anyone else.
More middle-income families might choose to take advantage of a tax deduction rewarding charitable contributions, even for those who do not itemize on their returns.
For households squarely in the middle of the income distribution, those earning between $53,300 and $92,100, the average tax cut will be $1,590, according to analysis from the Institute on Taxation and Economic Policy (ITEP).
Bigger tax breaks: Wealthy people will get the biggest tax cuts from the bill by far. While low-income families will see a modest change in their tax bills, most high-income households will pay much less than they otherwise would.
According to ITEP’s analysis, 69 percent of the value of the tax cuts will go to the top 20 percent of earners — those making more than $153,600 — and more than 20 percent of the cuts will go to the top 1 percent, those earning more than $916,900.
Lost health care: The bill slashes about $1 trillion from Medicaid — the largest cut in the program’s history — and at least 17 million Americans are projected to lose health coverage or insurance subsidies that make coverage affordable, according to the nonpartisan Congressional Budget Office.
Work requirements: The measure imposes work and reporting requirements for the first time on Medicaid recipients whose income is from 100 percent to 138 percent of the federal poverty level (roughly $32,000 to $44,000 for a family of four). These are people who became eligible for Medicaid under the 2010 Affordable Care Act’s expansion of the program. Able-bodied adults between 19 and 64 years old will have to prove they are working, volunteering or going to school at least 80 hours a month. The bill provides exemptions for certain groups, including those who are pregnant, disabled or taking care of dependent children 13 or younger. States have to put these requirements in place by Dec. 31, 2026.
More documentation: Medicaid recipients will have to submit paperwork, such as pay stubs, proving they are meeting the work requirements. Even those who are exempt will have to demonstrate they are still eligible. Health care providers view these requirements as onerous and warn they will throw people off their coverage because many will struggle to stay on top of the paperwork or not even know about the change.
The bill requires states to do an extra eligibility check every six months, starting in 2027. That could open the door to people losing coverage midyear.
Tax-free gratuities: The bill makes good on Trump’s campaign promise by excluding as much as $25,000 of tip income per year from taxation for workers earning as much as $150,000 ($300,000 for a couple). Those who exceed those pay levels would see a smaller deduction.
To ensure workers don’t reclassify income as tips to avoid paying taxes, the bill requires the Treasury Department to produce a list of professions that “customarily and regularly received tips” before the end of last year and will only allow workers in those fields to deduct their tips.
Tax credits disappear: Filers who don’t have Social Security numbers — generally noncitizens — can no longer claim the child tax credit even if their child is an American. Nor can they benefit from tax code changes that lift taxation on tips and overtime pay, or certain education credits under the bill.
Education loans: The legislation repeals Biden-era student loan forgiveness programs. It also sets new repayment standards for borrowers, who would make fixed payments for 10 to 25 years based on the terms of their loan. Under the means-tested plan, payments are between 1 and 10 percent of the principal, and borrowers can deduct $50 per payment for each of their dependents. Borrowers are rewarded for making on-time payments. Unpaid interest is waived, and the government will match $50 per payment on the loan principal. Any outstanding balance is forgiven after 30 years.
Jeff Stein contributed to this report.
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