Overview
A major new piece of U.S. legislation, referred to as the "Big Beautiful Bill," was signed into law on July 4th, introducing significant changes to taxes, health care, student loans, energy policy, retirement accounts, and social programs, with broad implications for individuals and the wider economy.
Key Tax Changes
- Federal taxes on tip income and overtime pay are eliminated up to certain limits.
- 2017 Trump tax cuts are made permanent from 2025 through 2028.
- New short-term tax breaks phase out for individuals earning above $150k or couples above $300k.
- High-income earners (over $1M annually) receive a 3% after-tax income boost, about $75,000/year.
Automotive and Consumer Deductions
- New deduction for interest paid on loans for new cars assembled in the U.S., capped at $10,000/year; actual typical savings are under $500/year.
Student Loan Reforms
- Caps introduced: $100k for grad students, $200k for medical/law students, replacing previously unlimited borrowing under the graduate plus loan program.
Child Tax Credit Adjustments
- Credit increases from $2,000 to $2,200 per child, with inflation adjustments starting 2026.
- Not all families qualify; estimated 17 million children in low-income families will not receive the full benefit.
Health Care and SNAP Changes
- Medicaid faces $800B in cuts over 10 years; stricter work and reporting requirements for enrollees.
- Up to 12 million Americans may lose Medicaid coverage due to the new eligibility rules.
- SNAP benefits will adjust more slowly for inflation; work requirement imposed on childless adults aged 18–55.
Energy Policy Shifts
- Funding redirected from green energy to oil, gas, and nuclear; fewer tax credits for solar/efficiency upgrades.
- States may impose extra utility fees for exceeding monthly electricity use limits.
Retirement Account Overhaul
- Backdoor Roth IRA strategy eliminated starting 2026, removing after-tax IRA conversions.
- Introduction of "Trump Retirement and Savings Accounts" (TRSAS), with no income limits, $1,000 government seed for newborns (2025–2028), and $5,000 personal annual contribution cap—investable only in broad U.S. index funds.
Charitable Deduction Changes
- Middle-income earners can claim up to $2,000 in charitable deductions without itemizing.
- Wealthy households see slightly reduced benefits from itemized charitable deductions.
Economic and Inflation Impacts
- Bill projected to add over $3 trillion to the deficit in 10 years, primarily through increased borrowing.
- Changes considered fundamentally inflationary, likely benefiting asset owners and widening wealth inequality.
Decisions
- Make Trump tax cuts permanent (2025–2028)
- Cap student loan borrowing
- Increase and adjust child tax credit
- Redirect energy funding
- Eliminate backdoor Roth IRA
Action Items
- 2026 – All savers: Prepare for the end of backdoor Roth IRA conversions.
- 2025–2028 – Eligible parents: Open TRSAS accounts for children born during this period.
- TBD – Medicaid/SNAP recipients: Review new work and reporting requirements to maintain eligibility.
- TBD – Car buyers: Check eligibility for the new car loan interest deduction.
Questions / Follow-Ups
- How will the government address increased deficit spending and long-term inflation risks?
- What additional changes in the bill may surface as implementation proceeds?