Big changes ahead! How Trump's Big Beautiful Bill could impact your Income Tax and wallet

Time of India

a day ago

Trump's Big Beautiful Bill: how your income taxes will change after the 'big, beautiful bill' becomes law-
President Donald Trump is officially moving ahead with what he calls a 'big, beautiful bill' that could reshape America's tax system once again. After passing through Congress, the tax overhaul is now set to be signed into law on Friday, and it brings permanent tax cuts for the wealthy, temporary breaks for middle- and low-income households, and big changes to social welfare programs like Medicaid and food assistance.
According to the Tax Policy Center, around 85% of households will see a tax cut by 2026 — but that number could shrink to 70% by 2030 as temporary provisions expire. Meanwhile, the bill adds between $3.4 trillion and $6 trillion to the national debt over the next decade, depending on which estimates you follow — from the Congressional Budget Office, Committee for a Responsible Federal Budget, or Cato Institute.
What tax breaks will high-income earners get under Trump's new bill?
If you're earning more than $217,000 a year, you're in line for some of the biggest tax cuts.
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Households making $217,000 to $318,000 will save about $5,400, a 2.6% rise in after-tax income.
Those earning between $318,000 and $460,000 will get a bigger cut — around $8,900, or a 3.1% boost.
If your income falls between $460,000 and $1.1 million, the average cut jumps to $21,000, or 4.4% of after-tax income.
For the top 1% and top 0.1% (earning more than $1.1 million or $5 million, respectively), the gains are still strong:
Top 1%: 3.5% after-tax income increase.
Top 0.1%: 3.2% bump.
Notably, about 60% of the total tax benefits in the bill are projected to go to the top 20% of income earners, as per the Tax Policy Center.
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How much will middle-class Americans save in taxes?
Middle-income households — those earning between $50,000 and $200,000 — will see smaller savings.
Those making $100,000 to $200,000 will get an average $3,000 tax break (2.5% after-tax income boost).
Households bringing in $75,000 to $100,000 can expect about $1,700 back (2.3%).
If you earn $50,000 to $75,000, the savings drop to around $1,000.
So while many middle-class families will benefit from Trump's tax bill, the size of those cuts doesn't compare to what higher earners will receive.
Will low-income Americans really benefit from this tax plan?
Low-income workers — especially those earning less than $50,000 per year — will get the smallest tax breaks, and they may face larger cuts elsewhere.
Households earning $40,000 to $50,000 will see tax savings of around $630 (1.5–1.9%).
Those making under $34,600 will get a modest $150 cut, about 0.8% of their after-tax income.
However, here's the tradeoff: the bill slashes federal Medicaid spending by $1 trillion, which could leave 12 million people without health insurance by 2034, according to the Congressional Budget Office.
It also tightens eligibility for SNAP (food stamps) and Medicaid by adding work requirements, which could lead to millions losing benefits — a move that hits low-income households the hardest.
What new tax deductions are included in Trump's tax bill?
Trump's bill introduces several targeted deductions, some permanent and others temporary.
The child tax credit rises permanently to $2,200.
The standard deduction increases by $750.
A new $6,000 deduction for Americans over 65 applies through 2028.
A $25,000 tax exemption on tips is introduced, but it only lasts for three years.
An additional $12,500 deduction for overtime will also expire after three years.
Another major win for taxpayers in high-tax states: the SALT (State and Local Tax) deduction cap goes up from $10,000 to $40,000, easing the burden for many in states like California, New York, and New Jersey.
How much will Trump's tax cuts increase the national debt?
These tax changes come at a high price.
The Congressional Budget Office estimates the bill will add $3.4 trillion to the debt over the next decade.
The Committee for a Responsible Federal Budget puts the number at $4.1 trillion.
The Cato Institute, a conservative think tank, estimates the cost could be as high as $6 trillion.
This has drawn criticism from some Republicans who've previously branded themselves as fiscal conservatives. Despite their concerns about the rising national debt, many still voted for the bill, seeing it as a core part of Trump's 2024 campaign promise to 'cut taxes bigly.'
So, what happens next with Trump's tax overhaul?
With President Trump set to sign the bill into law Friday, most changes will start in 2025, although some provisions will kick in immediately.
While the wealthiest Americans are set to benefit the most — and permanently — middle- and low-income households will need to watch how cuts to health and welfare programs affect them long term.
Many of the deductions aimed at working families and seniors expire within a few years, and unless extended, could leave them worse off by the end of the decade.
Still, most Americans will likely see some savings in 2026, even if temporary — and that could shape voter sentiment ahead of the 2026 midterm elections and beyond.
85% of households get a tax cut in 2026; drops to 70% by 2030
Wealthiest (top 20%) get 60% of benefits
Middle class sees $1,000–$3,000 in savings
Low-income families face small tax cuts and big program losses
The bill adds $3.4–$6 trillion to the national debt
As always, consult with a tax advisor for personal impact — and keep an eye on how long these breaks actually last.
FAQs:
Q1: What is Trump's tax bill 2025 and who benefits most from it?
Trump's tax bill 2025 gives the biggest tax cuts to high-income earners, while offering smaller breaks to middle- and low-income households.
Q2: Will Trump's 2025 tax plan affect Medicaid and food stamps?
Yes, the 2025 tax bill includes deep spending cuts to Medicaid and food assistance, affecting millions of low-income Americans.