Anaya Nolan
On July 4, 2025, President Trump signed into law a massive tax and spending bill, also known as the One Big Beautiful Bill Act or OBBBA, which centers around extending the 2017 Trump tax cuts. The bill makes permanent many of the temporary tax law changes that were first introduced as part of the Tax Cut and Jobs Act (TCJA) back in 2017. The TCJA permanently lowered corporate tax rates, but most individual tax cuts were set to end after 2025 unless Congress extended them. Trump's new tax plan focuses on maintaining broad tax relief while providing gains to business owners and high-net-worth households.
| Characteristics | Values |
|---|---|
| Name of the tax plan | One Big Beautiful Bill Act |
| Date signed into law | July 4, 2025 |
| House vote | July 3, 2025 |
| Senate vote | July 1, 2025 |
| Senate Finance Committee's release of text for tax components | June 16, 2025 |
| Senate amendment | June 27, 2025 |
| GDP increase | 1.2% |
| Reduction in federal tax revenue | $5 trillion |
| Spending reductions | $1.1 trillion |
| Dynamic deficit increase | $3 trillion |
| Core focus | Maintaining broad tax relief while benefiting business owners and high-net-worth households |
| Key proposals | Estate and gift tax exemption, exemption of tip income from federal income tax, exemption of overtime pay from federal income tax, auto loan interest deduction, higher taxes on US imports |
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What You'll Learn
- Trump's tax plan was signed into law on July 4, 2025
- The plan includes tax exemptions for tips, overtime pay, and Social Security benefits
- The One Big Beautiful Bill Act will increase long-run GDP by 1.2%
- The bill will reduce federal tax revenue by $5 trillion over the next decade
- The bill will benefit business owners and high-net-worth households
Trump's tax plan was signed into law on July 4, 2025
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. The Act, also known as the "One Big Beautiful Bill", was passed by the House on July 3, 2025, and amended by the Senate on July 1, 2025.
The new tax laws make permanent many of the temporary tax law changes that were first introduced as part of the Tax Cut and Jobs Act (TCJA) in 2017. Trump's plan focuses on maintaining broad tax relief while providing gains to business owners and high-net-worth households. Specifically, these changes could benefit some working families, small business owners, and wealthy individuals with significant estates or investment income.
The Act includes several relief measures aimed at reducing taxable income for some workers. For example, the legislation exempts qualified tips from federal income tax and makes overtime fully deductible. It also introduces a deduction for auto loan interest for American-made cars and maintains the expanded child tax credit. Additionally, the Act creates Trump savings accounts for children, which offer a $1,000 tax credit when opened for a child between January 1, 2025, and December 31, 2028.
However, the Act also removes certain education and health-related deductions and rolls back clean energy credits. It is estimated that the Act will increase long-run GDP by 1.2% and reduce federal tax revenue by $5 trillion from 2025 to 2034. Dynamic feedback will reduce the revenue loss by about 19% to $4.1 trillion, while spending reductions of $1.1 trillion will reduce the dynamic deficit increase to $3 trillion over the same period.
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The plan includes tax exemptions for tips, overtime pay, and Social Security benefits
President Trump's tax plan, the One Big Beautiful Bill Act, was signed into law on July 4, 2025. The bill includes two provisions that create above-the-line deductions for tips earned in traditionally tipped occupations and for overtime pay. This means that workers can subtract their earnings from tips and overtime from their taxable income, effectively exempting those amounts from federal income tax.
However, it is important to note that not all workers will be eligible for these deductions, and there are caveats for how much can be deducted and which taxes are eliminated. While the amount workers earn from tips and overtime won't be completely tax-free, the exemption applies toward federal income tax. Federal payroll tax, which funds Social Security and Medicare, will still apply to any earnings.
The One Big Beautiful Bill Act also introduces changes to taxes on tips and overtime for certain workers. Additionally, the bill makes permanent certain provisions from the Tax Cuts and Jobs Act (TCJA) that were set to expire, including an increased state and local tax (SALT) deduction cap. The bill also impacts energy credits, Medicaid, the debt ceiling, and student loans. Most of the new tax laws under the bill come into effect in the tax year 2025 (taxes filed in 2026), with some applying to tax year 2026 and a few uncommon provisions being retroactive to tax year 2024.
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The One Big Beautiful Bill Act will increase long-run GDP by 1.2%
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. The Act is a tax and spending megabill that centres on extending the 2017 Trump tax cuts and making them permanent. The bill will also introduce new tax cuts and changes to the tax code, as well as reduce spending.
The One Big Beautiful Bill Act will make permanent many of the temporary tax law changes that were first introduced as part of the Tax Cut and Jobs Act (TCJA) in 2017. The TCJA included a permanent lowering of corporate tax rates, but most individual tax cuts were set to end after 2025 unless Congress extended them. The One Big Beautiful Bill Act makes many of the individual tax cuts and reforms of the TCJA permanent, including the lower individual income tax rates, the larger standard deduction, and the expanded child tax credit.
The Act will also introduce several new relief measures aimed at reducing taxable income for some workers. For example, the legislation exempts qualified tips from federal income tax and makes overtime fully deductible after 2025. The Act also includes a Trump savings account for children, which is a form of an IRA retirement account with a $1,000 tax credit when opened for a child born between January 1, 2025, and December 31, 2028.
Analyses by the Tax Foundation and the Congressional Budget Office (CBO) estimate that the One Big Beautiful Bill Act will increase long-run GDP by 1.2% and reduce federal tax revenue by $5 trillion over the next decade on a conventional basis. The Act is also estimated to increase hours worked by 938,000 jobs, wages by 0.4%, and the capital stock by 0.7%.
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The bill will reduce federal tax revenue by $5 trillion over the next decade
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. The Act includes permanence for major individual and corporate provisions of the 2017 Tax Cuts and Jobs Act (TCJA).
The One Big Beautiful Bill Act will increase long-run GDP by 1.2% and reduce federal tax revenue by $5 trillion from 2025-2034 on a conventional basis. Dynamic feedback will reduce the revenue loss of the bill by about 19% to $4.1 trillion. Spending reductions of nearly $1.1 trillion will reduce the dynamic deficit increase to $3 trillion from 2025-2034.
The bill will also increase the standard deduction to $15,750 for singles, $23,625 for heads of households, and $31,500 for married couples filing jointly. These amounts will increase with inflation each year. The bill introduces several relief measures aimed at reducing taxable income for some workers. For example, the legislation exempts qualified tips from federal income tax and makes overtime fully deductible after 2025.
Trump's new tax plan focuses on maintaining broad tax relief while providing gains to business owners and high-net-worth households. Specifically, these changes could benefit some working families, small business owners, and wealthy individuals with significant estates or investment income. However, taxpayers who do not qualify for these deductions or credits may see fewer advantages.
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The bill will benefit business owners and high-net-worth households
On July 4, 2025, President Trump signed into law a massive tax and spending bill that will benefit business owners and high-net-worth households. The bill, known as the "One Big Beautiful Bill" or OBBB, makes permanent many of the temporary tax law changes that were first introduced as part of the 2017 Tax Cuts and Jobs Act (TCJA).
The TCJA included a number of provisions that benefited high earners and large businesses, such as permanently lowering corporate tax rates and reducing taxes for taxpayers across the income spectrum. The OBBB builds on the TCJA by making several temporary provisions permanent, including maintaining lower individual income tax rates, keeping the larger standard deduction, and continuing the expanded child tax credit.
The OBBB also includes new provisions that will benefit business owners and high-net-worth households. For example, the bill introduces tax breaks for businesses, such as making expensing for R&D and equipment permanent. It also reduces taxes on investment income and maintains the current structure of estate planning by preserving the higher exemption threshold for gifts and inheritances.
In addition to these benefits for businesses and high-net-worth households, the OBBB also includes some relief measures aimed at reducing taxable income for workers. For instance, the legislation exempts qualified tips from federal income tax and makes overtime fully deductible. However, it's important to note that taxpayers who do not qualify for these deductions or credits may see fewer advantages under the new bill.
Overall, while the OBBB provides benefits to some working families and small business owners, it is largely criticized for benefiting the wealthiest people in the country and slashing funding for important public services.
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Frequently asked questions
Trump's tax plan includes extending the 2017 tax cuts, imposing tariffs on US imports, exempting tip income from taxes, and removing taxes on overtime pay and Social Security benefits for retirees.
Trump's tax plan was signed into law on July 4, 2025.
Trump's tax plan includes maintaining broad tax relief while providing gains to business owners and high-net-worth households. It also introduces relief measures to reduce taxable income for some workers.
The "One Big Beautiful Bill Act" is legislation that makes permanent many of the temporary tax law changes first introduced as part of the 2017 Tax Cut and Jobs Act (TCJA). It includes tax cuts and changes to the tax code, as well as spending reductions.
