Overview
The recently passed "Big Beautiful Bill" introduces major policy changes affecting taxes, healthcare, student loans, energy, retirement accounts, and more, with widespread economic impacts and controversy over its consequences.
Tax Changes
- No federal taxes on tip income and overtime pay up to specified limits.
- Trump tax cuts extended permanently from 2025 through 2028.
- New short-term tax breaks for service workers and overtime, phasing out above $150,000 per individual or $300,000 per couple.
- Deduction for interest paid on new US-assembled car loans, capped at $10,000 per year, with real savings averaging less than $500/year.
- The child tax credit increases from $2,000 to $2,200 per child, with annual inflation adjustments starting in 2026, but not all families qualify for the full amount.
Student Loans
- New borrowing caps: $100,000 for graduate students, $200,000 for medical and law students.
- Removal of unlimited borrowing under the graduate plus loan program to control student debt growth.
Healthcare and Food Assistance
- $800 billion Medicaid funding cut over 10 years; stricter rules including 80-hour monthly work requirement for childless adults and more frequent income/residency verification.
- Up to 12 million Americans risk losing healthcare coverage due to these changes.
- SNAP (food stamps) benefits will adjust more slowly for inflation, with new 80-hour monthly work requirements for adults 18–55 without children.
Energy Policy
- Funding shifts from green energy programs to oil, gas, and nuclear sectors.
- Reduced tax credits for solar panels and efficiency upgrades, potentially increasing their costs.
- States may impose additional utility fees for exceeding monthly electricity use limits.
Retirement and Savings
- Backdoor Roth IRA conversions eliminated starting 2026.
- Introduction of Trump Retirement and Savings Accounts (TRSAS) with no income limits, $1,000 government contribution per newborn (2025-2028), and $5,000 annual after-tax contribution cap, invested only in total US stock market index funds.
Impact on Wealth and Charitable Giving
- Individuals earning over $1 million gain an estimated 3% increase in after-tax income, partly via higher SALT deduction cap and adjusted charitable deduction rules.
- Middle-income earners can now claim up to $2,000 charitable deductions without itemizing, while wealthy households see slightly reduced itemized deduction benefits.
Economic and Investor Outlook
- The bill is projected to add over $3 trillion to the national deficit over ten years, largely funded by borrowing.
- Anticipated asset inflation, benefiting those with assets (e.g., real estate, Bitcoin), while non-owners may be disadvantaged.
Decisions
- Make 2017 Trump tax cuts permanent (2025–2028)
- Cap student loan borrowing ($100K graduate, $200K medical/law)
- Increase child tax credit to $2,200 per child
- Cut Medicaid funding, adding work and verification requirements
- Eliminate backdoor Roth IRA conversions (2026)
- Introduce TRSAS accounts with government backing
- Shift energy funding and adjust utility fee policies
Action Items
- 2026 – Taxpayers: Prepare for the end of backdoor Roth IRA conversions and explore alternative retirement strategies.
- 2025–2028 – New parents: Open TRSAS accounts for eligible newborns to receive $1,000 government contribution.
- TBD – Service workers and overtime earners: Review eligibility for new tax breaks under the updated bill.
- TBD – Medicaid and SNAP recipients: Verify compliance with new work and reporting requirements to maintain benefits.