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What does Trump's tax bill mean for your money? Here are the biggest impacts for Californians

What does Trump's tax bill mean for your money? Here are the biggest impacts for Californians

Congress on Thursday passed its version of the massive Republican tax cut and spending bill, just ahead of President Donald Trump's July 4 deadline. The legislation now heads to Trump's desk to sign.
The bill passed 218-214, with Republican Reps. Thomas Massie of Kentucky and Brian Fitzpatrick of Pennsylvania voting no, along with all 212 Democrats.
An analysis from the nonpartisan Congressional Budget Office found the tax and spending bill would add at least $3.3 trillion to the federal debt over the next decade. And a CBO analysis of the House version estimated that the wealthiest American households would see a $12,000 increase from the legislation, and the bill would cost the poorest people $1,600 a year, mainly due to reductions in Medicaid and food assistance.
There will be many effects felt by Americans at an individual level — including some provisions especially impactful for California and Bay Area homeowners.
Here's what you need to know about the consumer impacts of the new bill.
Changes SALT deductions
A major point of contention for the legislation was how deductions for state and local taxes would be handled. Prior to the 2017 Tax Cuts and Jobs Act, homeowners could write off what they paid in state and local taxes, or SALT, from their federal tax bill. The TCJA made it so that only $10,000 of SALT could be deducted. Ever since then, Republican congressional representatives from blue states — so-called SALT Republicans — have been fighting to bring it back.
The House's initial version of SALT modifications underwent changes in the Senate. That's the version that went back to the House and got final approval Thursday. Here's what they landed on:
An annual cap of $40,000 in SALT deductions for households making less than $500,000 in 2025, increasing by 1% through 2029, at which point the cap would drop back down to $10,000.
The $40,000 cap would begin to phase out at $500,000, eventually dropping to a limit of $10,000.
No new limits for SALT workarounds through pass-through entities (businesses that don't pay taxes at the corporate level and instead have the income 'pass through' to the owner, who reports it on their individual tax return), which had been included in the House's version of the bill.
A limit on the deduction value to a 35% rate for the highest earners.
An extension of the alternative minimum tax (AMT) exemption at current inflation-adjusted levels ($1.25 million in 2025) and a phase-out of the exemption at 50% at 2018 levels.
Many of the tax cuts in the 2017 TCJA were set to expire in 2025. The new bill makes many of them permanent, including dropping the corporate tax rate from 35% to 21% and lowering marginal income tax rates for most tax brackets.
Permanently increases child tax credit
Similarly, the TCJA upped the child tax credit from $1,000 to $2,000 through 2025; this bill makes it permanent and bumps it to $2,200 for 2025, then indexes it to increase annually for inflation starting in 2026.
Creates a 'senior deduction'
Trump campaigned on getting rid of federal taxes on Social Security payments. That couldn't be accomplished in this bill, since it was done in reconciliation, but instead Republicans are offering a $6,000 'bonus' deduction per person for some seniors.
Seniors 65 and older making less than $75,000 a year (or $150,000 for married couples) would qualify for the full deduction. Seniors making over $75,000 (again, $150,000 for married couples) would see the benefit phase out, and cease at income levels of $175,000 and higher ($250,000 for married couples).
Experts say roughly half of Americans age 65 and older wouldn't be able to take it at all, because they don't have enough annual tax liability to claim this new deduction. In other words: You can't deduct below $0. If you already aren't paying federal taxes, or paying less than the standard deduction ($29,200 for 2024), there's nothing to deduct.
Creates a new type of child savings accounts
The bill creates a new type of investment account for babies born from Jan. 1, 2025 through Dec. 31, 2028 that will receive a one-time $1,000 deposit from the federal government if both parents have Social Security numbers. Starting in 2026, this type of account will be available to all U.S. citizens under the age of 8, though only babies born between 2025 and 2028 will get the $1,000 'bonus.'
Lowers student loan limits and reduces temporary relief
The legislation would limit unsubsidized federal loans for graduate students to $20,500 per year with a $100,000 lifetime cap. For professional degrees, like law school and medical school, borrowing would be limited to $50,000 per year and $200,000 overall. It creates a lifetime borrowing limit of $257,500 for all federal student loans, and limits parental borrowing through Parent PLUS to $20,000 per year, per student, with a $65,000 lifetime cap. The bill eliminates the Grad PLUS loan program.
It also curtails repayment options for new borrowers and gets rid of programs that allow borrowers to get temporary relief for things like unemployment and economic hardship.
Ends EV and green energy credits
The legislation gets rid of a number of tax credits designed to ease America's green energy transition in former President Joe Biden's 2022 Inflation Reduction Act. It ends the $7,500 credit for new electric vehicles and $4,000 credit for used electric vehicles as of Sept. 30. Many other credits for home improvements like heat pumps, battery storage, weatherization, rooftop solar and other changes will cease at the end of the year.
Creates a temporary tax break on tipped income
The bill allows people in qualified professions that typically receive cash tips to deduct up to $25,000 from their taxes. People who make more than $150,000 ($300,000 for married couples) would not qualify. The deduction would cease after 2028.
Creates a temporary car loan interest deduction
People making less than $100,000 ($200,000 for married couples) would be able to deduct up to $10,000 of interest on loans for new cars assembled in the United States. The deduction would begin to phase out for people making over $100,000 and not be available for people making over $150,000 ($250,000 for married couples.) The tax break would sunset after 2028.
Economists have said few people pay anywhere near that much in annual interest on their car loan, especially people making under six figures; one told CNBC he estimated the break would amount to an average of around $500 in the first year of the loan.
Creates a temporary overtime-pay deduction
Another Trump campaign promise was to eliminate taxes on overtime pay. The bill has a version of that: Up to $12,500 can be deducted for people making less than $150,000 annually. The benefit begins to phase out at incomes higher than that. Like many of the benefits of the bill designed to appeal to Trump's working-class base, this one ends after 2028.
Enhances pass-through business deductions
The bill makes the TCJA change to Section 199A deductions for pass-through entities permanent. The maximum tax break will be 20%.
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