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Axios
08-07-2025
- Business
- Axios
Trump's "big, beautiful bill" stops short of "no tax on tips" promise
The fine print in President Trump's recently signed"big, beautiful bill" could restrict savings for some tipped workers. Why it matters: Trump made "no taxes on tips" a centerpiece of his presidential campaign — and while a provision in the new law honors that idea on the surface, it doesn't eliminate all taxes. Here's what to know: How does the "big, beautiful bill" impact tipped workers? State of play: A qualifying worker's first $25,000 in tips are exempt from income taxes. Tipped workers will still pay 7.65% in payroll taxes that fund Social Security and Medicare. The law shouts out food service and cosmetics industry workers specifically, stressing that the tax exemption will apply "only to certain lines of business." By the numbers: The tax deduction would decrease once a worker's income hits $150,000 — decreasing further at $300,000. Tipped workers filing a joint return with spouses would also see less of a deduction. The law also requires workers to provide their Social Security numbers — as well as any spouses — making undocumented workers ineligible for the tax break. Undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022, per the Institute on Taxation and Economic Policy (ITEP). When does the tax provision go into effect? The law will apply to the current tax year, including tips already accrued. How many tipped workers are there? About four million people in the U.S. earned tips in 2023, according to Yale University's Budget Lab. That's 2.5% of all workers. Two-thirds of restaurant workers who work for tips earn so little that they don't pay federal income taxes, per a 2024 report parsing data from the Census Bureau's American Community Survey. Workers are currently taxed on tips, which puts an added financial strain on a demographic that tends to be lower income. The median weekly wage for tipped occupations in 2023 was $538, versus $1,000 for non-tipped workers, per the Budget Lab. What did Trump promise tipped workers on the campaign trail? "No tax on tips" began as a promise Trump made during a 2024 campaign stop in Nevada. It has since become a top talking point for Republicans as they've promoted their megabill. The intrigue: "No tax on tips" has emerged as a rare bipartisan, populist policy. Former Vice President Kamala Harris adopted the promise as a part of her own presidential campaign two months after Trump did. In May, the Senate passed a separate "No Tax on Tips Act" in a surprise move, which no lawmakers — Republican or Democrat — objected to. Will no taxes on tips help tipped workers?
Time of India
08-07-2025
- Business
- Time of India
5 things to know about the US school choice law in the 'One, Big, Beautiful Bill'
US launches first nationwide private school choice programme under new education law. (AI Image) The "One, Big, Beautiful Bill" signed into law by US President Donald Trump on July 4 has introduced a significant new national education policy. The law includes a federally funded private school choice provision, making it the first of its kind to be implemented at the federal level in the United States. As reported by K12Dive, the provision forms part of a larger tax and spending package and has been framed by supporters as a major advancement in parental choice for K–12 education. It offers families access to financial resources for a wide range of education-related expenses. However, the structure and implementation of the programme carry key details that stakeholders will need to understand ahead of its rollout. A nationwide school choice programme backed by federal funds The law establishes the first nationwide, federally funded private school choice initiative in the US. Unlike previous programmes limited to state or local levels, this measure allows eligible families across the country to access scholarships for private and home education. According to K12Dive, it covers both secular and religious schools, as well as public school expenses such as tutoring and transport. Parents may use the funds for tuition, educational therapies, technology, and even homeschooling costs. However, participation depends on whether individual states choose to opt in to the federal programme, and as K12Dive noted, it is not yet clear which agencies or leaders will make that determination. Eligibility linked to local income levels Families whose household income does not exceed 300% of the median gross income for their locality will qualify for the programme. For example, as reported by K12Dive, students in Memphis in families earning up to $364,400 would be eligible, based on a local median income of $91,100. The law entrusts scholarship-granting organisations, which must be independent and unaffiliated with any school, to assess eligibility and distribute scholarships. Parents cannot directly use tax credits to fund their child's education expenses. A tax credit model with significant fiscal implications The school choice programme is structured around a unique federal tax incentive. Taxpayers who contribute up to $1,700 annually to a qualified scholarship-granting organisation will receive a 100% federal income tax credit. As highlighted by K12Dive, this dollar-for-dollar tax benefit is unlike any other charitable giving structure currently available under federal law. The Institute on Taxation and Economic Policy (ITEP), cited by K12Dive, estimated that if 43% of taxpayers—approximately 59 million people—participate, the cost to the federal government could reach $101 billion per year. The law does not impose a cap on total programme expenditure, despite earlier legislative proposals limiting it to $4 billion or $5 billion annually. Programme implementation set for 2027 The law specifies that the tax credit will begin for taxable years ending after December 31, 2026. This means the full rollout is expected in 2027. Between now and then, the US Department of Education must establish regulations for the programme's operation, including reporting, enforcement, and state certification of scholarship-granting organisations. As per K12Dive, no implementation timeline has yet been released by the Department. Key questions remain regarding how this programme will integrate with the existing 35 state-level private school choice schemes serving around 1.3 million students, as noted by EdChoice. Mixed reactions and ongoing preparations While some groups have welcomed the bill, others have expressed concern. Anthony J. de Nicola, chairman of the Invest in Education Coalition, stated that the law represents "a huge victory for American families," as quoted by K12Dive. On the other hand, EdTrust, an education equity group, criticised the measure as an "extremely costly federal voucher programme" with limited oversight, and referred to the legislation as the "Great American Heist," according to K12Dive. The law's long-term impact will depend on decisions made at the state level and on federal regulations yet to be finalised. As K12Dive reported, both school choice advocates and public school supporters are expected to remain active in shaping the future of this landmark programme. TOI Education is on WhatsApp now. Follow us here . Ready to navigate global policies? Secure your overseas future. Get expert guidance now!
CNBC
03-07-2025
- Business
- CNBC
Trump ‘big beautiful' bill gives top 1% biggest tax cuts in these states
A massive package of tax cuts championed by President Trump and awaiting a final vote in the House would be a windfall for the wealthiest U.S. households. But the size of that financial benefit depends largely on where high-income taxpayers live, according to a new analysis by the Institute on Taxation and Economic Policy. The legislation would give the top 1% of U.S. households an average tax cut of about $66,000, or about 2.4% of their income, in 2026, according to ITEP, a left-leaning think tank. (These households have incomes of $917,000 or more per year, averaging about $2.7 million, it said.) Some households stand to get a much bigger tax benefit. The wealthiest households in three states — Wyoming, South Dakota and Texas — would see their annual tax bills fall by more than $100,000, ITEP found. In Wyoming, the top 1% would see their taxes fall most: by an average of about $133,000 (or 3% of income) in 2026, it said. The average income of the top 1% in the state is about $4.5 million. "The bill is most advantageous to conservative-leaning states that have a lot of very wealthy people living within their borders," said Carl Davis, ITEP's research director. These states also don't levy personal income taxes, he said. Wyoming and Texas "are classic examples of states with a lot of wealthy people and which tax those wealthy people incredibly lightly," Davis said. Senate Republicans passed the legislation, originally called the One Big Beautiful Bill Act, on Tuesday with the slimmest of margins. House Republicans are poised to pass the bill Thursday and send it to the president for his signature. The legislation offers more than $4 trillion of net tax cuts over a decade, with most benefits accruing to higher-income households, analyses have found. It also slashes the social safety net, cutting billions of dollars from programs like Medicaid and food stamps meant to help lower earners. More from Personal Finance:Top five tax changes for the wealthy in Trump megabillTrump tax deductions may not carry large benefits for low earnersTrump megabill axes $7,500 EV tax credit after September The centerpiece of the bill is an extension of 2017 tax cuts enacted during President Trump's first term in office. Overall, the legislation lowers income tax rates, exempts a larger share of wealthy estates from taxation and offers tax breaks to business owners. These are among the core ways the GOP bill benefits high-income households, Davis said. It also caps the amount of state and local income taxes and property taxes that households can deduct from their taxable income each year, at $40,000. That "SALT" policy doesn't negatively impact wealthy residents in states like Wyoming, South Dakota and Texas, where residents don't owe state income tax, Davis said. But it has a large impact on states with high state and local income taxes and property taxes. In other words, high-income residents of Wyoming, South Dakota and Texas generally get most of the tax upside and not much downside, he said. Conversely, the highest earners in California and New Jersey would see a smaller tax cut in 2026, averaging about $34,000 and $21,000, respectively, ITEP found. That represents about 1% of their income in each state. Separate analyses have found that the wealthiest households will reap the largest financial benefits from the GOP bill. The top 20% of U.S. households (earning more than $217,000 a year) would get a tax cut equivalent to 3.4% of their after-tax income in 2026, according to the Tax Policy Center. Meanwhile, the bottom 20% would get a 0.8% tax cut. Its analysis only examined the tax portions of the legislation. Overall, more comprehensive analyses that also account for cuts to programs like Medicaid and the Supplemental Nutrition Assistance Program, the lowest earners would be worse off, according to analyses by the Budget Lab at Yale University and the Congressional Budget Office, which modeled similar legislation passed by the House last month.
CNBC
02-07-2025
- Business
- CNBC
Why Trump tax deductions — for tips, car loans and more — may not carry large benefits for low earners
Tax cuts are the centerpiece of a massive legislative package championed by President Trump and passed Tuesday by Senate Republicans. Many new tax breaks in the bill — on auto loans, tips and overtime pay, and for older Americans — are structured as tax deductions. How much money you save with tax deductions, which reduce your taxable income, depends on your bracket. Deductions are more valuable to higher-income households and less beneficial for lower earners, experts said. "The most modest-income workers can't use a tax deduction at all," said Carl Davis, research director of the Institute on Taxation and Economic Policy, a left-leaning policy think tank. Senate Republicans passed the legislation with the narrowest of margins on Tuesday. It now heads to the House, where its fate is uncertain. The Republican bill, originally called the One Big Beautiful Bill Act, has more than $4 trillion of net tax cuts, according to the Committee for a Responsible Federal Budget. Among them are several new tax deductions: If enacted as drafted, these deductions would be temporary, available from 2025 through 2028. They also carry various limitations such as income restrictions. A tax deduction reduces the amount of income that's subject to tax, i.e., taxable income. You can find your taxable income on line 15 of your Form 1040 individual income tax return. While the proposed tax deductions may sound large, there are a few reasons why low earners may not see much or any benefit, experts said. Households need some taxable income to benefit from a deduction, said Garrett Watson, director of policy analysis at the Tax Foundation. Low earners already get a large financial benefit from the standard deduction, Watson said. The standard deduction is worth up to $15,000 for singles and $30,000 for married couples filing jointly in 2025. (If the bill passes as drafted, it would raise the standard deduction to $15,750 for single filers, and to $31,500 for married filing jointly.) More from Personal Finance:Senate Republicans' spending bill boosts child tax creditSenate bill touts tax help for seniors on Social SecurityTrump megabill axes $7,500 EV tax credit after September To get a financial benefit from the new tax deductions for car loans, seniors, tips and overtime, a household's taxable income would have to exceed these thresholds, experts said. More than a third, or 37%, of tipped workers in 2022 had incomes low enough that they didn't owe federal income tax, according to an analysis last year by the Budget Lab at Yale University. That means a "meaningful share" of tipped workers wouldn't benefit from a tax deduction on tips, it said. The relative value of tax deductions depends on a household's tax bracket, experts said. There are seven federal income-tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Higher-income households generally fall in a higher tax bracket — any therefore can get a bigger benefit from reducing their taxable income. "If you're in a somewhat higher bracket, every dollar you get to deduct is worth more to you because that dollar would have been taxed at a higher rate," Davis said. Let's say two households — one in the 22% bracket and one in the 10% bracket — each deduct $1 of tipped income. The former gets a tax benefit worth 22 cents, while the latter gets one worth 10 cents, Davis said. There are other reasons why households may not be able to max out certain deductions. For example, households would need a car loan of roughly $112,000 or more to generate $10,000 of annual interest on a typical six-year loan, Jonathan Smoke, chief economist at Cox Automotive, an auto market research firm, told CNBC last month. Only about 1% of new auto loans are this big, according to Cox Automotive data. By comparison, the average new car buyer would be able to deduct $3,000 of interest from their taxable income in the first year of their loan, Smoke said. A deduction of that size would yield an average total tax benefit of about $500 or less in the loan's first year, he said. There are, however, two elements of the tax breaks that seek to better target benefits to low- and middle- income households. For one, they're all what's known as "above-the-line" deductions. This means households can claim them regardless of whether they use the standard deduction or itemize their deductions. High-income households may be more likely to itemize, meaning they detail a list of eligible deductions on their tax return. Taxpayers itemize when the deductions add up to more than the standard deduction. Some deductions are only available to taxpayers who itemize, such as for "SALT" (or, a deduction for state and local income taxes and property taxes) or mortgage interest. Also, the new deductions have income limits, barring them from the highest-income households. For example, the overtime deduction's value starts to decline once an individual's income exceeds $150,000 ($300,000 for married couples filing jointly). The value of the senior "bonus" falls once income exceeds $75,000 ($150,000 if married and filing jointly). Tax credits are another mechanism to lower a household's tax bill. A tax credit reduces your tax liability dollar-for-dollar. (If you claim a $1,000 credit, it can reduce your tax bill by $1,000.) Credits have the same dollar value regardless of your tax bracket. Unlike deductions, the "benefits from tax credits are skewed toward lower- and middle-income households," the Congressional Budget Office wrote in 2021. Credits can be "refundable" or "nonrefundable": The largest credits for individuals as measured by total government outlay are the child tax credit, earned income tax credit and the premium tax credit for health insurance, CBO said. The Senate legislation would permanently raise the maximum child tax credit to $2,200 starting in 2025, and would index this figure for inflation starting in 2026. The credit is partially refundable: Low earners can get up to $1,700 as a tax refund. But currently, 17 million children do not receive the full $2,000 child tax credit because their families don't earn enough and owe enough taxes, according to the Center on Budget and Policy Priorities.
CNBC
20-06-2025
- Automotive
- CNBC
House, Senate tax bills both end many clean energy credits: 'It's just a question of timeline,' expert says
Legislation that Republicans are trying to pass by the Fourth of July would end a slew of popular consumer tax breaks tied to clean energy, leading some experts to call on households to act now to collect the savings. Many tax breaks on the chopping block were created, extended or enhanced by the Inflation Reduction Act, a 2022 law signed by former President Joe Biden that provided a historic U.S. investment to fight climate change. More from Personal Finance:3 student loan changes in GOP megabillNot all vehicles may qualify for tax break on car loan interestSenate version of 'big beautiful' bill calls for $6,000 senior 'bonus' The Senate may vote on its measure, part of a broader package of domestic policy initiatives, as soon as next week. The House passed its version of the One Big Beautiful Bill Act in May. Both bills would eliminate tax credits for households that buy or lease electric vehicles, or that make their homes more energy efficient. "The intention of Republicans writing the bill is to root out all of the incentives from moving away from fossil fuels that the Biden administration puts in place, and it's just a question of timeline," said Matt Gardner, senior fellow at the Institute on Taxation and Economic Policy. Republicans would use money from the clean energy tax breaks — as well as cuts to food assistance and healthcare programs like Medicaid — to help pay for a broader multitrillion-dollar package of tax cuts for households and businesses, among other policy priorities. The "One Big Beautiful Bill Act," which House Republicans passed in May, would end a tax credit of up to $7,500 for qualifying households that buy a new electric vehicle and a $4,000 credit for those who buy a used EV. It would also end a separate tax incentive that allowed car dealers to pass along a $7,500 credit to consumers who lease an electric vehicle. Additionally, the House bill would end the energy efficient home improvement credit (also known as the 25C credit) and residential clean energy credit (the 25D credit), which help consumers defray the cost of projects like installing insulation, solar panels, heat pumps, and installing energy-efficient windows and doors. With few exceptions, these tax breaks would disappear in 2026, about seven years earlier than under current law, which makes them available through 2032. Senate Republicans, who haven't yet passed their version of the legislation, would end these tax breaks under a similar timeline. For example, the tax credit for used EVs would end 90 days after the law's enactment. The credits for new and leased EVs, as well as the ones tied to energy efficiency, would disappear after 180 days. Advocates for preserving the tax credits argue that getting rid of the tax breaks would raise monthly bills for U.S. households and businesses. A group of 21 House GOP lawmakers in March expressed support for preserving clean energy tax credits, in a letter to Rep. Jason Smith, R-MO, chairman of the House Ways and Means tax-writing committee. "As our conference works to make energy prices more affordable, tax reforms that would raise energy costs for hard working Americans would be contrary to this goal," they wrote. Consumers who want to ensure they get a federal tax break for buying an EV or undergoing an energy-efficiency home project should act soon, according to experts. "Based on the existing proposed language, if you've been considering an EV or planning to get one, now is the time to do it," Alexia Melendez Martineau, senior policy manager at Plug In America, told CNBC recently. The legislation may change in the Senate, which may vote on the massive domestic policy measure as soon as next week. If there are changes, the House would have to pass the legislation before sending it to President Trump's desk.
