What does Trumpâs âbig billâ mean for household budgets?
Daniel TorokâOfficial White House Photo
Signed into law in July 2025, the One Big Beautiful Bill Act (OBBBA) touches nearly every corner of the household budget. It extends tax cuts, rewrites credits for energy upgrades and electric vehicles, introduces new deductions, and sharply reduces federal funding for social programs. Some provisions take effect immediately; others begin in 2026.
Key Points
- The One Big Beautiful Bill Act of 2025 extends individual tax cuts and the larger standard deduction through 2034.
- The law temporarily raises the state and local tax (SALT) deduction cap and expands other popular deductions.
- The legislation ends the electric vehicle tax credit on September 30, 2025, while tax credits for clean energy upgrades expire December 31.
Several tax provisions originally set to expire after 2025 are now locked in for another decade. They include:
Personal exemptions, which were scheduled to return in 2026, wonât be reinstated under the new law.
Child tax credit increase
The OBBBA increases the child tax credit to $2,200 a child for 2025 (up from $2,000) and provides for annual inflation adjustments to both the credit and the refundable portion. But annual income limits are not indexed. The maximum refundable amount for 2025 is $1,700, as set by the Internal Revenue Service (IRS). Eligibility rules for low-income families are unchanged; households that donât owe federal income tax still wonât receive the full credit.
New deductions and temporary tax breaks
- Deduction for overtime pay. Nonexempt employees who work more than 40 hours a week can claim a deduction of up to $12,500 ($25,000 for joint filers) of overtime pay, even if you donât itemize. The deduction phases out for single filers with a modified adjusted gross income (MAGI) above $150,000 and joint filers above $300,000.
- Tip income deduction. Up to $25,000 in reported tip income can be excluded from your taxable income, regardless of whether you take the standard deduction or itemize. It phases out at the same income thresholds as the overtime deduction: $150,000 for single filers and $300,000 for joint filers.
- Car loan interest deduction. If you buy a new vehicle assembled in the U.S. for personal use in 2025 through 2028, you can deduct up to $10,000 in loan interest a year. The deduction phases out above $100,000 in MAGI for single filers and $200,000 for joint filers.
- Temporary SALT cap increase. The cap on deducting state and local taxes (SALT) has increased to $40,000 from $10,000, with phaseouts for high earners. It reverts to $10,000 in 2030.
- Business tax breaks are preserved. Bonus depreciation and the 20% qualified business income (QBI) deduction remain in effect for self-employed individuals and small business owners, with increased income thresholds.
New tax benefits for older adults
From 2025 through 2028, taxpayers 65 and older can claim an additional $6,000 standard deduction if their MAGI is under $75,000 for single filers and $150,000 for those married filing jointly. The law doesnât change how Social Security benefits are taxed, but the temporary deduction may lower or eliminate tax on those benefits for some middle- and lower-income seniors. This new deduction is available whether you take the standard deduction or itemize.
Energy and vehicle incentives eliminated
The new law ends or rewrites several clean energy and electric vehicle incentives:
- Residential clean energy credit. The 30% credit for solar panels, geothermal systems, and other clean energy upgrades ends after December 31, 2025. The credit was previously scheduled to continue through 2032, so the new law ends it seven years early.
- Energy-efficient home improvement credit. Worth up to $1,200 a year for items such as insulation and heat pumps, this credit also expires after 2025.
- Clean vehicle credit. The credit for electric vehiclesâup to $7,500 for new models and $4,000 for used onesâends for EVs placed in service after September 30, 2025. Until then, eligible EVs must still meet final assembly, battery sourcing, and income limit rules.
- Home electrification rebates repealed. A program created under the Inflation Reduction Act of 2022 to offer up-front rebates for energy-efficient home upgrades, such as heat pumps and induction stoves, was eliminated before it launched.
Cuts to federal benefits and safety net programs
The act scales back federal support for major health and nutrition programs, shifting more responsibility to states and individuals.
 Whoâs hit hardest?
Low-income families, older adults, individuals with disabilities, and rural residents may face the greatest barriers to accessing health care and food assistance as states and providers adjust to the cuts imposed by the One Big Beautiful Bill Act. Hospitals that treat patients regardless of ability to pay could also face financial pressure as more uninsured patients are expected to seek care in emergency rooms.
- Medicaid. Most adults under age 65 must meet new work and reporting requirements, typically 80 hours a month, to remain covered. Exemptions apply to some parents and those with disabilities. Analysts project that increased paperwork may lead to coverage losses among eligible enrollees. States may need to restrict eligibility or raise their own spending to maintain benefits.
- Supplemental Nutrition Assistance Program (SNAP). The law imposes stricter work requirements on able-bodied adults under 65, along with new administrative hurdles. Missed paperwork or reporting lapses could result in benefit losses even for those who still qualify. States receiving less federal funding may reduce eligibility or benefit amounts.
- Affordable Care Act (ACA) premium subsidies. Enhanced subsidies for health coverage purchased through the ACA marketplace end after 2025. Stricter eligibility rules and shorter enrollment windows could make it harder to sign up or stay covered. Millions may face higher premiums or lose coverage as a result, according to the nonpartisan Congressional Budget Office.
Whether you use AI or a spreadsheet, the 50-30-20 rule offers a solid starting point for budgeting your money.
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Estate tax and other changes
The estate and gift tax exemption has risen to $15 million for individuals ($30 million for couples) and continues to be indexed for inflation. The change primarily affects high-net-worth households.
Education and student loans
The law reshapes student aid by consolidating repayment into two plans, including a new income-based option with forgiveness after 30 years. The act lowers the maximum amount students and parents can borrow in federal loans, eliminates Graduate PLUS loans, and restricts Pell Grants to full-time students.
Colleges whose graduates consistently earn too little to repay their loans could lose access to federal loan programs. Some rules, such as repayment formulas and college accountability criteria, have yet to be finalized, but the major changes are already written into law.
From Invest America to Trump accounts
The idea for the child investment accounts began in 2021, when investor Brad Gerstner and his children discussed ways to help younger people build wealth. Gerstner later created a nonprofit, Invest America, to promote the concept and proposed federal seed money for what he called Invest America accounts. Senator Ted Cruz of Texas introduced legislation using that name, although the proposal failed to move forward. The concept gained momentum only after Gerstner and Dell Technologiesâ Michael Dell brought it to President Trump during negotiations over what became the One Big Beautiful Bill Act. In the final version of the legislation, âTrump accountsâ was adopted as the name, even though earlier proposals used the Invest America label.
The act also created a new program of child investment accounts, known as Trump accounts, scheduled to launch July 4, 2026. Under the law, any parent of a child under age 18 may open an account. Accounts for children born from January 1, 2025, through December 31, 2028, will be seeded with $1,000 by the Treasury Department. Families may add their own contributions until the child turns 18, and employers can contribute without it counting as taxable income to the employee. Annual limits apply to both types of contributions.
Supporters say the accounts can help children enter adulthood with at least some savings and experience with long-term investing. The money must be invested in a stock index fund, and the accounts follow tax rules similar to those for traditional individual retirement accounts (IRAs). The funds can be used once the child turns 18 for specific purposes, such as education, buying a first home, or starting a business. Withdrawals are taxed as ordinary income, and those made for other purposes before age 59œ would be subject to a 10% penalty.
To help children who were born before the Trump account qualifying dates, the Michael & Susan Dell Foundation pledged $6.25 billion (enough to provide $250 to each eligible child under age 10, as well as older children if enough funds remain). The gift is expected to reach up to 25 million children, but only those living in ZIP codes with a median family income of $150,000 or less qualify. In making the commitment, the Dells hope to spur additional philanthropic support.
The One Big Beautiful Bill Act of 2025 rewrites the personal finance playbook for the next decade. It locks in lower income tax rates, expands deductions for workers, phases out major clean energy credits, and introduces new relief for seniors and parents. But it also repeals programs and trims safety net spending, and many provisions have income limits or expiration dates.
If youâre planning big financial decisions, such as buying a car, updating your home, or navigating retirement, review how the lawâs changes may affect your budget and financial goals.
This article was most recently revised and updated by David ScheppThis article was most recently revised and updated by Nancy Ashburn
