Inside President Trump's "Big Beautiful Bill"
- Trevor Carnovsky
- Jul 13
- 6 min read
Updated: 6 days ago
On July 4th, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBB), commonly referred to as the “Big Beautiful Bill,” into law. While the bill has sparked significant debate, particularly over its expansive spending, Medicaid impacts, and accelerated phase-out of renewable energy credits, its provisions reach across a wide array of policy areas. In this article, I’ll break down the Act's most critical elements, from reduced taxes on tips and overtime to changes in Medicaid and the state and local tax (SALT) deduction. This legislation has broad implications for both government operations and the U.S. economy.
The "Big Beautiful Bill" covers a wide range of provisions, with major implications for healthcare, taxation, family support, and national defense. Below is a breakdown of some of the Act's most impactful components.
Healthcare Changes:
Medicaid:
One of the most controversial provisions in the “Big Beautiful Bill” involves changes to Medicaid eligibility and enrollment. An estimated 10-15 million Americans may lose Medicaid coverage over the coming years, largely due to the recently implemented work requirements and verification procedures. These changes are projected to result in approximately $1 trillion in federal spending reductions over the next decade. The key provisions consist of:
Adults aged 19–64 must complete at least 80 hours a month (20 hours a week) of work, volunteering, schooling, or community service to maintain Medicaid eligibility.
More frequent eligibility checks (twice a year, instead of annually).
Requirements begin in December 2026, with states required to follow guidelines by April 1, 2027.
Americans exempt from the requirements:
Under 19 or over 64
Pregnant/postpartum
Total‑disability veterans
Caregivers of children (under age 14) or disabled dependents
Enrollees in Medicare
Medically frail (blind, disabled, SUD, mental disorder, serious conditions)
Current/recent inmates
American Indians or Urban Indians
Supplemental Nutrition Assistance Program (SNAP):
Yet another hotly debated provision in the "Big Beautiful Bill" is the revisions to the SNAP program, which is likely to experience an approximate $200 billion spending cut over the next decade. The key provisions include:
Requires states to provide funding for the food assistance program. Additionally, Funding will now be recalculated every 3 years instead of 5 years.
To maintain benefits, parents of children aged 14 or older must meet work requirements of 80 hours a month (20 hours a week). The bill also raises the work requirement age to 64, from the previous age of 54.
New age range 18-64 for work (phased in from 2025-2027).
Tax Reforms:
Additional Senior Tax Deductions:
Seniors are eligible for additional tax deductions on top of the standard deduction, including:
A $6,000 deduction for single taxpayers aged 65 and older.
A $12,000 deduction for married couples where both spouses are 65 and older.
Given the increased medical expenses that often come with age, these added deductions offer some meaningful financial relief for seniors. This policy recognizes the unique financial challenges older Americans face and helps protect their retirement income.
New Deductions for Tips and Overtime Income:
Starting this year, the first $25,000 of tips will be tax-deductible through 2028. The deduction begins to phase out when the taxpayer's modified adjusted gross income (MAGI) exceeds certain income thresholds of $150k for a single filer or $300k for MFJ.
Also starting this year, up to $12,500 single, $25,000 MFJ of extra overtime pay will be tax deductible through 2028. Like tips, the deduction begins to phase out when the taxpayer's MAGI exceeds certain income thresholds of $150k for a single filer or $300k for MFJ.
With decreased taxation on tips, Americans will be able to keep more of their hard-earned money. Leaving room for additional spending, saving, and/or investing.
Increased Standard Deduction:
The standard deduction will increase to $16,550 for single filers and $33,100 for MFJ in 2026 (2027 tax season). Beyond 2026, the standard deduction will remain inflation-adjusted.
While the standard deduction typically rises each year, it was set to revert to pre-2017 levels without the Bill’s passage. Not only did the Act make the 2017 standard deduction doubling permanent (which took the single deduction from $6,350 to $12,000 and the MFJ from $12,700 to $24,000), but it ensured the standard deduction will continue to increase, adjusted for inflation, for years to come. This change will provide meaningful tax relief, increasing disposable income for spending, saving, or investing.
Increased SALT Deductions:
Taxpayers can write off a portion of their State and Local taxes (SALT) from their federal taxes.
The Act temporarily raises the federal cap on the SALT deduction from $10,000 to $40,000 starting in 2025, with inflation adjustments through 2029. The cap reverts to $10,000 in 2030.
This increase expands the potential tax savings for Americans who itemize deductions, with particularly significant benefits for residents of high-income tax states such as:
California (13.3%)
Hawaii (11%)
New Jersey (10.75%)
Oregon (9.9%)
Minnesota (9.85%)
District of Columbia (8.95%)
New York (8.82%)
Vermont (8.75%)
Iowa (8.53%)
Wisconsin (7.65%)
Auto-loan Interest Deduction:
Americans may deduct up to $10,000 annually in auto loan interest if the vehicle is assembled and purchased in the United States through 2028.
This deduction begins to phase out for single filers with a MAGI over $100,000 and for MFJ over $200,000. The deduction is reduced by $200 for every $1,000 (or portion thereof) by which MAGI exceeds these thresholds. It fully phases out at $150,000 MAGI for single filers and $250,000 for MFJ.
While this provision may appear beneficial for individuals with auto loans on U.S.-built vehicles, the actual impact is unclear. The phase-out threshold is notably aggressive, and it is relatively uncommon for auto loans to accrue $10,000 in annual interest. Nevertheless, even a partial deduction provides some financial relief, ultimately putting more money back into Americans' wallets.
Family and Child Revisions:
Increased Child Tax Credit:
The child tax credit has increased from $2,000 to $2,200 for 2025 and will be adjusted for inflation after 2026.
Phase out remains the same with $200k single and $400k MFJ
Though the child tax credit generally experiences an annual increase, it was set to revert to pre-2017 levels without the Bill being enacted. Not only did the Act make the 2017 child tax credit doubling permanent (which took the credit from $1,000 to $2,000), but it ensured the child tax credit will continue to increase adjusted for inflation, for years to come.
Child Savings Account:
Auto-enrolling children under 8 years of age into a “Trump Account” starting as early as January 1, 2026. Furthermore, each U.S. citizen born from January 1, 2024, to December 31, 2028, will be eligible to receive $1,000 in their Trump Account.
Parents, relatives, and others can contribute up to $5,000 annually (after‑tax) until the child turns 18. Earnings grow tax‑deferred; qualified distributions (education, homeownership, entrepreneurship) at age 18+ are subject to long-term capital gains tax, while non-qualified distributions may incur ordinary income tax.
No distributions will be allowed until the child reaches 18. After that, account holders will only access up to 50% of their funds for higher education, training programs, small business loans, and first-time home purchases. At age 25, savings account holders can withdraw up to the full balance of the account, but only for the aforementioned limited purposes. Upon reaching 30, account holders can access the full balance for any purpose desired.
Funds must be invested in diversified U.S. equity index funds.
This initiative aims to decrease the financial burden of raising children while simultaneously increasing U.S. investment.
Increased Defense Spending:
Defense spending will increase by $153 billion, which includes investments such as:
25 billion for the "Golden Dome" missile defense system.
$29 billion for new Navy ships.
$15 billion for nuclear deterrence.
Final Thoughts on President Trump's "Big Beautiful Bill":
The "Big Beautiful Bill," which as of July 4, 2025, has officially been enacted, addresses major aspects of American tax policy, healthcare, defense, and family financial planning. Supporters commend the Act's focus on tax relief, national security, and long-term investment in American families. The Act's critics scrutinize its costs, impact on healthcare access, and the accelerated phase-out of certain renewable energy incentives.
In the end, whether the Act is viewed as a bold restructuring or a costly overhaul, it is clear the "Big Beautiful Bill" will have an imprint on the U.S. economy and the daily lives of Americans in the coming years.
Lastly, I would like to note that I do not directly invest based on changes in governmental policy. While the changes may carry significant implications, both positive and negative, it is best to rely on other methods of valuation to make investment decisions, as governmental policy can be rather volatile over a long-term horizon.
References
Text - H.R.1 - 119th Congress (2025-2026): One big beautiful bill act | congress.gov | library of Congress. (n.d.-c). https://www.congress.gov/bill/119th-congress/house-bill/1/text
Schubel, K. (2025, May 15). The GOP wants to auto-enroll your child in a “trump account” for savings. Kiplinger. https://www.kiplinger.com/taxes/gop-proposes-maga-savings-accounts
Myers, D. (2025, July 10). Car Loan Interest deduction 2025–2028: What auto dealerships need to know under the one big beautiful bill. Albin, Randall and Bennett. https://arbcpa.com/car-loan-interest-deduction-2025-2028-what-auto-dealerships-need-to-know-under-the-one-big-beautiful-bill/#:~:text=For%20single%2C%20head%20of%20household,upper%20limit%20are%20not%20eligible.
H&R Block. (2025, April 24). Income tax by State. https://www.hrblock.com/tax-center/irs/tax-brackets-and-rates/highest-lowest-taxed-states/?srsltid=AfmBOophiPUc3f_c-P-Dqtt_Fh1-8rjarnHccm1CVSLblrJoX7Zoz8PJ
Team, E. on W. (2025, July 10). H.R.1, the one big beautiful Bill Act, enacted July 4, 2025. SPARK. https://www.adp.com/spark/articles/2025/07/hr-1-the-one-big-beautiful-bill-act-enacted-july-4-2025.aspx#:~:text=The%20Act%20temporarily%20raises%20the,reverts%20to%20%2410%2C000%20in%202030.
R/Medicaid on reddit: No nonsense summary of BBB Medicaid changes from an insider. (n.d.-c). https://www.reddit.com/r/Medicaid/comments/1ltbjiv/no_nonsense_summary_of_bbb_medicaid_changes_from/
Trump’s Big, beautiful bill: Where SNAP benefits could get hit hardest. (n.d.-e). https://www.axios.com/2025/07/03/trump-big-beautiful-bill-snap
Disclaimer: This is not an attempt to portrait political bias whatsoever. In this article I have worked to provide some key provisions in the recently enacted "Big Beautiful Bill".