The “One Big Beautiful Bill Act” continues the 2017 tax policy and rewrites the rules for healthcare, food assistance, and student loans.
President Donald Trump’s supported “One Big Beautiful Bill Act” has brought about a significant reshaping of American tax and social policies, with its impact varying across different groups.
This nearly one-thousand-page law went into effect on July 4, permanently enshrining key elements of the tax cuts implemented by President Trump in 2017. The Act introduces several new – albeit time-limited – deduction items, tightens eligibility and financing rules for healthcare assistance programs and food aid, and redesigns the federal student loan system.
Here is a breakdown of the changes categorized by groups – as well as the populations most likely to notice these changes.
One key change for many families is the increase in standard deduction amounts. Linked to the new law, IRS inflation adjustments show that for the 2025 tax year (tax returns filed in 2026), the standard deduction for single filers is $15,750, and for married couples filing jointly, it is $31,500. By the 2026 tax year, these amounts will rise to $16,100 and $32,200, respectively.
The “One Big Beautiful Bill Act” increases the Child Tax Credit to $2,200 per eligible child starting in 2025, with up to $1,700 refundable, benefiting even families with little to no tax liability. This credit will be adjusted annually based on inflation starting in 2026 to prevent erosion of its value due to rising prices.
The law also establishes “Trump Accounts” for children born between 2025 and 2028, offering a $1,000 initial federal seeding and allowing additional annual contributions within certain limits. Parents can contribute up to $5,000 per year to a Trump Account – also known as an “Invest in America Account” – which allows deferred taxation on account funds tied to investments in the U.S. stock index. Employers can contribute an additional $2,500.
The legislation does not entirely eliminate taxes on social security benefits but provides a temporary additional deduction for individuals aged 65 and older. Specifically, eligible taxpayers 65 and above can claim an extra $6,000 deduction in the 2025-2028 tax years, with the deduction gradually phasing out based on income levels.
As it functions as a deduction rather than a credit, it reduces taxable income instead of directly reducing tax liabilities, meaning its actual value depends on the taxpayer’s marginal tax rate.
The Social Security Administration indicates that under this change, nearly 90% of beneficiaries will not need to pay federal income tax on their benefits, while the Tax Foundation estimates this measure will reduce the tax burden on seniors by approximately $30 billion annually.
Two of the most publicized provisions in the law are new temporary deductions for workers whose income includes tips or overtime pay.
Eligible workers can claim up to $25,000 annually in deductible tip income from 2025 to 2028, with the benefit tapering off at higher income levels.
For overtime wages, workers can only deduct the premium portion – the additional earnings above their regular hourly wage – up to $12,500 for single filers and $25,000 for married couples filing jointly, subject to the same income phase-out rules.
The legislation introduces a temporary deduction for auto loan interest allowing taxpayers to deduct up to $10,000 per year for interest on loans used to purchase eligible passenger vehicles for personal use after December 31, 2024.
This deduction gradually phases out for higher-income households and does not apply to leased vehicles or vehicles used for business purposes, with the deduction set to expire in 2028 unless Congress takes action to extend it.
The deduction applies to vehicles, SUVs, vans, pickup trucks, sports utility vehicles, and motorcycles finally assembled in the U.S., both for itemized taxpayers and non-itemized taxpayers.
Beginning in 2025, the cap on State and Local Tax (SALT) deductions will increase from $10,000 to $40,000, increasing by 1% annually until 2029, then reverting to $10,000 in 2030.
Lawmakers from high-tax states like California and New York have long pushed for this increase, considering the previous $10,000 cap disproportionally impactful on their constituents.
The expanded deduction amount will phase out among taxpayers with incomes exceeding $500,000.
The “One Big Beautiful Bill Act” accelerates the termination of several clean energy tax credits, ending incentives for electric vehicles and residential energy projects earlier than under previous laws.
Tax credits for home energy improvements and residential clean energy that are put into service or paid for after December 31, 2025, are no longer applicable, and the clean vehicle credit does not apply to any vehicles purchased after September 30, 2025.
The law comprehensively reforms the federal student loan and repayment system, with significant changes applying to new loans starting in mid-2026.
From July 2026, new borrowers will no longer be eligible for several existing income-driven repayment plans (including SAVE, ICR, and PAYE). Instead, they can choose between standard fixed repayment plans for 10 or 25 years or a new income-driven repayment plan with a maximum repayment period of 30 years, with monthly payments ranging from 1% to 10% of their monthly income.
Additionally, new borrowing limits have been introduced to restrict graduate and parent loans, with a $100,000 ceiling for graduate loans and $200,000 for professional school student loans.
By 2027, the law eliminates arrangements allowing repayment deferrals due to economic hardship or unemployment, narrowing options for borrowers to pause student loan repayments.
The law introduces significant changes to Medicaid and related healthcare programs with key provisions gradually implemented over the coming years for states to adjust qualification criteria and financing structures.
Starting in 2027, most able-bodied adult Medicaid enrollees covered by the Affordable Care Act (ACA) expansion plans will be required to meet work or activity standards to maintain coverage. States must also adopt stricter eligibility reviews, including regular address verifications, quarterly death record checks, and limitations on retroactive coverage.
The legislation also limits states’ ability to finance Medicaid programs, reducing the “Safe Harbor” percentage used for expanding states’ medical provider taxes from 6% to 3.5% by 2032, thereby curbing states’ capacity to leverage these taxes for additional federal matching funds.
From 2028, the law further tightens oversight, increasing new provider scrutiny and verification steps while reducing state-led Medicaid payments.
The law does not extend the enhanced premium tax credit under the Affordable Care Act (ACA) beyond 2025, meaning premium increases for enrollees when the program is renewed in 2026.
It also reinstates full repayment of excess advance premium tax credits, regardless of income level. Taxpayers who received excess subsidies during the year typically have to repay the entire excess amount when filing taxes. Previously, there was a cap on repayment based on household income.
Other integrity measures introduced by the legislation tighten subsidy management by requiring verification before enrollment, allowing coverage to take effect but delaying the disbursement of tax credits until qualification information is confirmed.
For Supplemental Nutrition Assistance Program (SNAP) beneficiaries, the law imposes stricter requirements, expanding work-related time limits to adults aged 18-64 while narrowing temporary exemptions for the homeless, veterans, and certain former foster youth.
Additionally, starting in 2028, the law shifts part of the SNAP benefit cost – up to 15% – to states, ending the long-standing arrangement of full federal funding for the welfare program.
To support medical services in 2026, the law temporarily boosts physician payment rates by 2.5% until the year’s end, potentially reducing provider opt-outs and ensuring patients access to healthcare services.
Simultaneously, the law includes budget rules that the Congressional Budget Office suggests may compel Medicare spending cuts from the 2026 fiscal year onward if Congress does not intervene.
The legislation also revokes several Biden-era insurance rules and prohibits federal funding to abortion service providers for a year starting from July 4, 2025, with limited exceptions.
Overall, the immediate impacts of the law are mainly seen in taxation, extending the post-2017 tax rate structure and adding new deduction items. Its long-term effects manifest through stricter healthcare and social safety net qualification requirements, as well as a redesigned student loan repayment system.