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CNBC
23-07-2025
- Business
- CNBC
Trump floats 'no tax on capital gains' for home sales. Here's who could benefit
President Donald Trump on Tuesday said the administration is considering ending capital gains taxes on home sales to boost the housing market. When asked about the idea in the Oval Office on Tuesday, Trump told reporters, "we're thinking about that." "If the Fed would lower the [interest] rates, we wouldn't even have to do that," he said. "But we are thinking about no tax on capital gains on houses." Under current law, home sellers can face capital gains taxes once profits exceed $250,000 for single filers or $500,000 for married couples filing jointly. More from Personal Finance:Trump's 'big beautiful bill' created a new student loan plan: What to knowAffordable Care Act health plan enrollees could face 'subsidy cliff' in 2026Trump's 'big beautiful bill' includes these 2025 tax changes Trump's comments come roughly two weeks after Rep. Marjorie Taylor Greene, R-Ga., introduced the No Tax on Home Sales Actto eliminate capital gains taxes on primary home sales. "Homeowners who have lived in their homes for decades, especially seniors in places where values have surged, shouldn't be forced to stay put because of an IRS penalty," she said in a statement. "My bill unlocks that equity, helps fix the housing shortage, and supports long-term financial security for American families." However, the proposal could be costly, and it's unclear whether the measure has broad Congressional support, experts say. "I think this could generate some interest, but they're more likely to raise the exemption than they are to eliminate the tax entirely," Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, told CNBC. Enacted in 1997, the $250,000 and $500,000 capital gains exclusions — which apply to primary home sales — have never been indexed for inflation. Since 1997, the median home sales price has climbed by nearly 190%, from about $145,000 to roughly $417,000, as of the first quarter of 2025, according to Federal Reserve data. As home values rise, certain individuals, such as long-time homeowners, are more likely to exceed the $250,000 and $500,000 thresholds, which could trigger capital gains taxes, experts say. When home sales profits exceed $250,000 or $500,000, capital gains are levied at 0%, 15% or 20%, depending on taxable income. Excess profit above those thresholds can also trigger the so-called net investment income tax of 3.8%, depending on other investment earnings, according to the IRS. Some 29 million homeowners (34%) could exceed the $250,000 threshold for single filers, and 8 million (10%) could be above the $500,000 limit for married couples filing jointly, according to a 2025 study from the National Association of Realtors, or NAR. The organization has long advocated for capital gains reform for home sales. Homeowners in states like Washington, California, Utah and Massachusetts are more likely to be impacted, according to NAR data. However, many homeowners don't realize it's possible to reduce your home sales profit by adding so-called "capital improvements," such as home renovations to the original purchase price, experts say. If capital gains taxes for home sales were eliminated, the measure would primarily benefit sellers who are older and wealthier, according to an analysis released Tuesday from The Budget Lab at Yale University.
CNBC
07-07-2025
- Business
- CNBC
'Big beautiful bill' may help some seniors on Social Security. But it doesn't eliminate taxes on benefits
The Social Security Administration sent what experts say is a misleading email to consumers last week, describing President Donald Trump's "one big beautiful bill" as "long-awaited tax relief to millions of older Americans." In that email and a July 3 press release, the agency said the legislation will make it so "nearly 90%" of Social Security beneficiaries no longer pay federal income taxes on benefits. It attributed that to an additional $6,000 senior deduction and another unspecified provision. Tax experts say that is not accurate. The legislation does not include a provision that eliminates taxes on Social Security benefits for most beneficiaries. Moreover, while the Social Security Administration memo said the law helps protect Social Security, experts say the provisions weaken the program's funding by reducing the tax money it receives. "It's simply not correct to say that there's a provision in this bill that is going to eliminate the Social Security benefit tax for 90% of the population," said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center. "And it's also just wrong to say that this is going to preserve the solvency of Social Security," Gleckman said. More from Personal Finance:What Trump's 'one big beautiful' tax-and-spending package means for your moneyTax changes under Trump's 'big beautiful bill' — in one chart78% say Trump's tariffs will make it harder to deal with debt, survey finds Trump had said on the campaign trail that he planned to eliminate federal income taxes on Social Security benefits. However, the reconciliation process through which the budget and tax legislation was passed prohibits changes to Social Security. The Social Security Administration did not return requests for comment. The White House deferred comment to the Social Security Administration. The Council of Economic Advisers, an agency within the presidential executive office, estimates that changes in the legislation will help push the portion of seniors with exemptions and deductions exceeding Social Security income to 88%, from 64% under current law. Those tax changes include a higher standard deduction, the existing senior deduction already in effect and the new additional senior deduction or "bonus." The new tax package includes an additional deduction of up to $6,000 for seniors ages 65 and over. While the additional senior deduction has been called a "bonus" in the legislative text, it is technically a deduction, which reduces the amount of income that is subject to taxes. Notably, that does not necessarily mean seniors will see a $6,000 "bonus" check in the mail or in their refunds at tax time. "This is not like what happened during Covid, when the government was writing checks to people," Gleckman said. Per the legislation, the deduction will be in place for tax years 2025 through 2028. It will be available to eligible taxpayers regardless of whether they take the standard deduction or itemize their returns. But eligibility depends on income. Taxpayers with up to $75,000 in modified adjusted gross income — or up to $150,000 if married and filing jointly — may receive the full deduction. For incomes above those thresholds, the deduction gradually phases out. Middle-income seniors stand to benefit the most from the change, according to tax experts. Social Security benefits are taxed based on combined income, or the sum of adjusted gross income, nontaxable interest and half of Social Security benefits. Individuals with between $25,000 and $34,000 in combined income may have up to 50% of their Social Security benefits taxed. If their combined income is more than $34,000, up to 85% of their benefits may be taxed. For married couples with combined income between $32,000 to $44,000, up to 50% of their benefits may be taxed. If they have over $44,000, up to 85% of their benefits may be taxed. Those thresholds are not adjusted for inflation, which means that over time more beneficiaries pay taxes on their benefits. Because the new senior bonus is an above-the-line deduction, meaning it is subtracted from gross income to calculate adjusted gross income, it may indirectly reduce tax liability on Social Security benefits. The additional senior deduction will not affect taxes on Social Security benefits for individuals and couples below those income thresholds, since they already are not subject to levies on their benefits, Gleckman said. Nor will it help people who earn too much to qualify for the new deduction. Higher-income individuals and married couples with more than $75,000 or $150,000 in modified adjusted gross income, respectively, may not see their Social Security benefit taxes reduced, unless they are in the phaseout window. For taxpayers who qualify, the senior deduction may reduce, rather than eliminate, their taxes on benefits, Gleckman said. The Urban-Brookings Tax Policy Center estimates that fewer than half of older adults will benefit from the senior deduction, he said. Even those who benefit won't necessarily see zero taxes; they'll just see fewer taxes, Gleckman said. "The people who benefit the most, we estimate, are people who made between $50,000 and $200,000," Gleckman said. The legislation may be more generous to seniors than to taxpayers in other age cohorts, said Alex Durante, senior economist at the Tax Foundation. "The enhanced adoptions overall are going to reduce tax liabilities for seniors significantly, and for some people, it will probably wipe out any tax liability they have," Durante said. "But it depends on where they are in the income distributions," he said. While certain seniors may see financial benefits now, the enhanced senior deduction will cost the Social Security program, which is already under financial strain. The new additional senior deduction and other changes in Trump's "big beautiful bill" may reduce taxation of Social Security benefits by approximately $30 billion per year, estimates the Committee for a Responsible Federal Budget. That would accelerate the projected insolvency date for the Social Security trust fund devoted to retirement benefits to late 2032, up from the currently projected date of early 2033, according to CRFB. To help shore up the program's funds, Congress faces a choice of raising taxes, cutting benefits or a combination of both. The sooner any changes are enacted, the more time there is for them to be phased in, according to experts. "Every year we delay reforming the program means those changes will have to be steeper and affect more people closer to retirement age," CRFP President Maya MacGuineas wrote in a recent op-ed.
CNBC
03-07-2025
- Business
- CNBC
What Trump's 'one big beautiful' tax-and-spending bill means for your money
The Capitol at dawn during a vote-a-rama, on July 1, 2025 in Washington, DC. Trump's new legislation makes permanent the 2017 tax cuts while increasing these tax breaks: Standard deduction: Up from $15,000 to $15,750 (single) and $30,000 to $31,500 (married filing jointly) in 2025. Indexed for inflation. Estate and gift tax exemption: Up from $13.99 to $15 million (single) and $27.98 to $30 million (married filing jointly) in 2026. Indexed for inflation. Child tax credit: Up from $2,000 to $2,200 per child and $1,700 is refundable in 2025 (more below). Indexed for inflation. State and local tax deduction (SALT) limit: Up from $10,000 to $40,000 in 2025, with 1% increases through 2029. Reverts to $10,000 in 2030 (more below). — Kate Dore When you itemize tax breaks, the state and local tax deduction, known as SALT, provides a federal deduction for state and local income taxes and property taxes. Trump's 2017 tax cuts added a $10,000 SALT deduction cap, which has been a critical issue for certain lawmakers in high-tax states such as New York, New Jersey and California. The SALT deduction was unlimited before 2018. But the alternative minimum tax reduced the benefit for some wealthier Americans. The new legislation temporarily lifts the SALT cap to $40,000 starting in 2025. That benefit begins to phase out, or decrease, for consumers with more than $500,000 of income. Both figures would increase by 1% yearly through 2029, and the $40,000 limit would revert to $10,000 in 2030. In 2022, the average SALT deduction was close to $10,000 in states like Connecticut, New York, New Jersey, California and Massachusetts, according to a Bipartisan Policy Center analysis with the latest IRS data. Those high averages indicate "that a large portion of taxpayers claiming the deduction bumped up against the $10,000 cap," researchers wrote. Meanwhile, the states and district with the highest share of SALT deduction claimants were Washington, D.C., Maryland, California, Utah and Virginia, the analysis found. "If you raise the cap, the people who benefit the most are going to be upper middle-income," since lower earners typically don't itemize tax deductions, Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, previously told CNBC. The legislation also preserves a SALT cap workaround for pass-through businesses, which allows owners to avoid the $10,000 SALT limit. — Kate Dore The child tax credit is for families who have qualifying children under age 17 with a valid Social Security number. Trump's 2017 tax cuts temporarily boosted the maximum child tax credit to $2,000 from $1,000, an increase that would have sunset after 2025 without an extension from Congress. The legislation permanently bumps the biggest credit to $2,200 starting in 2025 and indexes this figure for inflation starting in 2026. The higher refundable portion of the child tax credit will also become permanent and adjust for inflation. That part, known as the additional child tax credit, is worth up to $1,700 for 2025. However, it won't help 17 million children from low-income families who don't earn enough to claim the full credit, according to Elaine Maag, senior fellow in the Urban-Brookings Tax Policy Center. — Kate Dore Older Americans may receive an extra tax deduction under the legislation, which includes a temporary enhanced deduction for Americans ages 65 and over — dubbed a "bonus." The full $6,000 deduction would be available to individuals with up to $75,000 in modified adjusted gross income, and $150,000 if married and filing jointly. It phases out for taxpayers who are above those thresholds. The temporary senior deduction would be in place for tax years 2025 through 2028. Ultimately, middle-income taxpayers may benefit most from the enhanced deduction, Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, recently told CNBC. The senior bonus is in lieu of eliminating taxes on Social Security benefits, which had been touted by the Trump administration, since changes to Social Security are generally prohibited in reconciliation legislation. The senior "bonus" may indirectly help defray taxes on Social Security benefits that older taxpayers face. However, that may advance the depletion of the trust funds the program relies on to pay retirement benefits, to late 2032 from early 2033, estimates the Committee for a Responsible Federal Budget. — Lorie Konish As Republicans seek to slash federal spending, Medicaid, which provides health coverage for more than 71 million people, has been a target for those cuts. The legislation cuts about $1 trillion from Medicaid, according to Congressional Budget Office estimates. House Minority Leader Hakeem Jeffries, D-N.Y., at the House Democrats' news conference on Medicaid and SNAP cuts proposed by the Republicans' reconciliation process. New federal work rules would require beneficiaries ages 19 to 64 who apply for coverage or who are enrolled through an Affordable Care Act expansion group to work at least 80 hours per month. Those start Dec. 31, 2026 for most states. Adults may be exempt if they have dependent children or other qualifying circumstances such as a medical condition; however, the legislation limits exemptions for parents to those with dependent children ages 14 and under. Medicaid changes would also require states to conduct eligibility redeterminations for coverage every six months, rather than every 12 months based on current policy. The legislation also limits states' ability to raise provider taxes, which may contribute to Medicaid coverage losses. About 7.8 million people could become uninsured by 2034 due to Medicaid cuts, the CBO projected based on an earlier version of the legislation. — Lorie Konish The legislation enacts cuts to food assistance through the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps. The cuts may ultimately affect more than 40 million people, according to the Center on Budget and Policy Priorities. That includes about 16 million children, 8 million seniors and 4 million non-elderly adults with disabilities, among others, according to CBPP, a nonpartisan research and policy institute. Many states would be required to pay a percentage for food benefits to make up for the federal funding cuts. If they cannot make up for the funding losses, that could result in cuts to SNAP benefits or states opting out of the program altogether, according to CBPP. The legislation expands existing work requirements to include adults ages 55 to 64 and parents with children 14 and over. Based on current rules, most individuals cannot receive benefits for more than three months out of every three years unless they work at least 20 hours per week or qualify for an exemption. Eligibility for food stamp benefits would also be limited to U.S. citizens and lawful permanent residents. An estimated 5.3 million families would lose at least $25 in SNAP benefits per month as a result of the legislation's changes, according to the Urban Institute. On average, those families would lose $146 per month. — Lorie Konish The legislation includes a new savings account for children with a one-time deposit of $1,000 from the federal government for those born in 2025 through 2028. So-called "Trump accounts," a type of tax-advantaged savings account, would be available to all children who are U.S. citizens. Parents would then be able to contribute up to $5,000 a year and the balance will be invested in a diversified fund that tracks a U.S. stock index. Employers could also contribute up to $2,500 to an employee's account and it wouldn't be counted as income to the recipient. Earnings grow tax-deferred, and qualified withdrawals are taxed as long-term capital gains. Republican lawmakers have said these accounts will introduce more Americans to wealth-building opportunities and the benefits of compound growth. But some experts say a 529 college savings plan is a better alternative because of the higher contribution limits and tax advantages. — Jessica Dickler Key changes are in store for student loan borrowers. For starters, the legislation expands access to Pell Grants, a type of federal aid available to low-income families, for students enrolled in short-term, workforce-focused training programs. However, the final bill also limits how much money people can borrow from the federal government to pay for their education. Among other measures, it: Caps unsubsidized student loans at $20,500 per year and $100,000 lifetime, for graduate students; Caps borrowing for professional degrees, such as those for doctors and lawyers, at $50,000 per year and $200,000 lifetime; Adds a lifetime borrowing limit for all federal student loans of $257,500; Caps parent borrowing through the federal Parent PLUS loan program at $20,000 per year per student and $65,000 lifetime; Eliminates grad PLUS loans. These allow grad students to borrow up to their entire cost of attendance minus any federal aid. Starting in mid-2026, there will be just two repayment plan choices for new federal student loan borrowers: They could enroll in either a standard repayment plan with fixed payments or an income-based repayment plan known as the Repayment Assistance Plan, or RAP. The legislation also eliminates the unemployment deferment and economic hardship deferment, both of which student loan borrowers use to pause their payments during periods of financial difficulty. — Jessica Dickler and Annie Nova The legislation creates a tax deduction for car loan interest. Certain households would be able to deduct up to $10,000 of annual interest on new auto loans from their taxable income. The tax break would be temporary, lasting from 2025 through 2028. There are some eligibility restrictions. For example, the deduction's value would start to fall for individuals whose annual income exceeds $100,000; the threshold is $200,000 for married couples filing a joint tax return. Cars must also be assembled in the U.S. In practice, the tax benefit is likely to be relatively small, experts said. "The math basically says you're talking about [financial] benefit of $500 or less in year one," based on the average new loan, Jonathan Smoke, chief economist at Cox Automotive, an auto market research firm, recently told CNBC. — Greg Iacurci The legislation creates a temporary federal income tax deduction of up to $25,000 per year on qualified tip income. The tax break would apply to workers who typically receive cash tips reported to their employer for payroll tax withholdings. It does not apply to taxpayers whose income exceeds $150,000, or $300,000 for joint filers. The temporary deduction for tip income would be in place for tax years 2025 through 2028. The Secretary of the Treasury will publish a list of occupations that typically received tips on or before Dec. 31, 2024. — Ana Teresa Solá The legislation also provides a temporary tax break for overtime pay, which Trump called for during the campaign. It offers a maximum $12,500 above-the-line deduction for overtime pay, and $25,000 for married couples filing jointly, from 2025 to 2028. The tax break begins to phase out once earnings exceed $150,000, and $300,000 for joint filers. — Kate Dore The legislation ends several consumer tax credits tied to clean energy. It ends a $7,500 tax credit for households that buy or lease a new electric vehicle, and a $4,000 tax credit for buyers of used EVs. These tax credits would disappear after Sept. 30, 2025. Additionally, it would scrap tax breaks for consumers who make their homes more energy-efficient, perhaps by installing rooftop solar, electric heat pumps, or efficient windows and doors. These credits would end after Dec. 31, 2025. 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. The tax breaks were slated to be in effect for another seven or so years, through at least 2032. — Greg Iacurci Under the legislation, individuals can receive a tax credit for donations they make to qualifying nonprofits awarding scholarships for K-12 students to attend private schools. School voucher fund donors can claim a 100% credit on those donations, up to $1,700. The break will be available starting in 2027. States and districts can choose whether to adopt the program, which experts say could tee up battles over school choice. Currently, 30 states and Washington, D.C., have at least one private school choice program, according to an Education Week analysis. Among other qualifiers, the scholarship-granting institution must fund awards for eligible students within the state. Students with family income not more than 300% of their area's median gross income would be eligible for the scholarships. — Stephanie Dhue Another key provision in the legislation offers a bigger deduction for so-called pass-through businesses, which includes contractors, freelancers and gig economy workers. Enacted via Trump's 2017 tax cuts, the Section 199A deduction for qualified business income will become permanent and remain at up to 20% of eligible revenue, with some limits. It was set to expire after 2025, but the new legislation makes the deduction permanent. — Kate Dore The core of the reconciliation package involves tax changes, so it's worth a quick recap of key tax terms to help you understand how the measures work and what they mean for your money: Deduction: A tax deduction reduces the amount of your income that's subject to tax, i.e., your taxable income. (You can find your taxable income on line 15 of Form 1040 for 2024.) So if you claim a $1,000 deduction, it can subtract $1,000 of income from tax. How much money that saves you depends on your tax bracket. The higher your bracket, the more a deduction can be worth: In that $1,000 deduction example, someone in the 24% bracket might save $240, while someone in the 12% bracket could save $120. Above-the-line deduction: A deduction that you can claim regardless of whether you claim the standard deduction or itemize. Itemized deduction: When you file your taxes, you have the option to either claim the standard deduction, or detail a list of eligible deductions, i.e., itemize. Taxpayers choose to itemize when the deductions they are eligible for add up to more than the standard deduction. Some deductions are only available to taxpayers who itemize. Credit: A tax credit reduces your tax liability dollar-for-dollar. So 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. They can be especially valuable for low- and middle-income households. Refundable credit: This term means that a credit can reduce your tax bill below zero, meaning you would get a tax refund for some or all of a credit's value. Some credits are partially refundable, which limits the size of that refund. Others are nonrefundable, meaning that they can reduce your tax bill to zero, but no lower. Credits that are nonrefundable or only partially refundable may prevent those with low income from getting the full value because they earn too little and don't owe taxes. Phaseout: The income level at which a tax break begins to become less valuable. Deductions and credits may have formulas that set a rate of reduction and/or a hard limit, above which the taxpayer is not eligible to claim that tax break.
CNBC
02-07-2025
- Business
- CNBC
What the Senate Republican tax-and-spending bill means for your money
Senate Republicans on Tuesday approved their version of President Donald Trump 's multitrillion-dollar tax-and-spending package, which could broadly impact millions of Americans' wallets. Similar to the House's One Big Beautiful Bill Act advanced in May, the Senate legislation aims to make permanent Trump's 2017 tax cuts, while adding new tax breaks for tip income, overtime pay and auto loans, among other provisions. If enacted, the bill could also slash spending on social safety net programs such as Medicaid and SNAP, end tax credits tied to clean energy and overhaul student loans. The spending package could still see changes as it returns to the lower chamber for approval. But a House floor vote could come this week to meet Trump's July 4 deadline. Here are some of the key provisions to watch — and how those measures could affect household finances. How to read this guide Follow along from start to finish, or use the table of contents to jump to the section(s) you want to learn more about. 'SALT' deduction Since 2018, the $10,000 cap on the state and local tax deduction, known as SALT, has been a critical issue for certain lawmakers in high-tax states such as New York, New Jersey and California. The SALT deduction — which lets taxpayers who itemize deduct all or some of their state and local income and property taxes — was unlimited for filers before 2018. But the alternative minimum tax reduced the benefit for some wealthier Americans. A sticking point for some House lawmakers, the lower chamber approved a permanent $40,000 SALT limit starting in 2025. That benefit begins to phaseout, or decrease, for consumers who have more than $500,000 of income. The Senate version of the bill would also lift the cap to $40,000 starting in 2025. It also begins to phaseout at $500,000. Both figures would increase by 1% yearly through 2029, and the $40,000 limit would revert to $10,000 in 2030. If you raise the cap, the people who benefit the most are going to be upper middle-income. "If you raise the cap, the people who benefit the most are going to be upper middle-income," since lower earners typically don't itemize tax deductions, Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, previously told CNBC. The Senate bill also preserves a SALT cap workaround for pass-through businesses, which allows owners to avoid the $10,000 SALT limit. By contrast, the House bill would eliminate the strategy for certain white-collar professionals. — Kate Dore The child tax credit gives families with qualifying dependent children a tax break. It's a credit, so it reduces their tax liability dollar-for-dollar. Trump's 2017 tax cuts temporarily boosted the maximum child tax credit to $2,000 from $1,000, an increase that will sunset after 2025 without an extension from Congress. If enacted, the Senate bill would permanently bump the biggest credit to $2,200 starting in 2025 and index this figure for inflation starting in 2026. Momo Productions | Getty Meanwhile, the House version of the bill lifts the top child tax credit to $2,500 from 2025 through 2028. After 2028, the credit's highest value would revert to $2,000 and be indexed for inflation. However, the proposed bills wouldn't help 17 million children from low-income families who don't earn enough to claim the full credit, according to Elaine Maag, senior fellow in the Urban-Brookings Tax Policy Center. — Kate Dore Older Americans may receive an extra tax deduction under the legislation. Both the House and Senate called for a temporary enhanced deduction for Americans ages 65 and over, dubbed a "bonus," in their respective versions of the "big beautiful" bill. The Senate proposed raising the deduction to $6,000 per qualifying individual, up from $4,000 proposed by the House. The full deduction would be available to individuals with up to $75,000 in modified adjusted gross income, and $150,000 if married and filing jointly. Notably, the Senate version would phase out at a faster rate for taxpayers who are above those thresholds. Ultimately, middle-income taxpayers may benefit most from the enhanced deduction, Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, recently told CNBC. The senior bonus is in lieu of eliminating taxes on Social Security benefits, which had been touted by the Trump administration, since changes to Social Security are generally prohibited in reconciliation legislation. — Lorie Konish As Republicans seek to slash federal spending, Medicaid, which provides health coverage for more than 71 million people, has been a target for those cuts in both House and Senate versions of the bill. The Senate version would cut more than $1 trillion from Medicaid, compared with more than $800 billion in cuts in the House version, according to Congressional Budget Office estimates. New federal work rules would require beneficiaries ages 19 to 64 who apply for coverage or who are enrolled through an Affordable Care Act expansion group to work at least 80 hours per month. Adults may be exempt if they have dependent children or other qualifying circumstances such as a medical condition. Notably, the Senate version of the bill proposed stricter limits on exemptions for parents, limiting it to those with dependent children ages 14 and under. The proposed Medicaid changes would also require states to conduct eligibility redeterminations for coverage every six months, rather than every 12 months based on current policy. About 7.8 million people could become uninsured by 2034 due to Medicaid cuts, the CBO has projected, based on the House bill. — Lorie Konish Both Senate and House versions of the "big beautiful" bill propose cuts to food assistance through the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps. The cuts in the Senate bill may ultimately affect more than 40 million people, according to the Center on Budget and Policy Priorities. That includes about 16 million children, 8 million seniors and 4 million non-elderly adults with disabilities, among others, according to CBPP, a nonpartisan research and policy institute. Many states would be required to pay a percentage for food benefits to make up for the federal funding cuts. If they cannot make up for the funding losses, that could result in cuts to SNAP benefits or states opting out of the program altogether, according to CBPP. The Senate proposal also seeks to expand existing work requirements to include adults ages 55 to 64 and parents with children 14 and over. Based on current rules, most individuals cannot receive benefits for more than three months out of every three years unless they work at least 20 hours per week or qualify for an exemption. For about 600,000 low-income households, food benefits could be cut by an average of $100 per month, according to CBPP. — Lorie Konish The Senate's version of Trump's budget bill also included a new savings account for children with a one-time deposit of $1,000 from the federal government for those born in 2024 through 2028. Starting in 2026, so-called " Trump accounts," a type of tax-advantaged savings account, would be available to all children under the age of 8 who are U.S. citizens, largely in line with the House plan advanced in May. To be eligible to receive the initial seed money, both parents must have Social Security numbers. Parents would then be able to contribute up to $5,000 a year and the balance will be invested in a diversified fund that tracks a U.S. stock index. Earnings grow tax-deferred, and qualified withdrawals are taxed as long-term capital gains. Republican lawmakers have said these accounts will introduce more Americans to wealth-building opportunities and the benefits of compound growth. But some experts say a 529 college savings plan is a better alternative because of the higher contribution limits and tax advantages. — Jessica Dickler Lower student loan limits, fewer benefits Key changes may be in store for student loan borrowers. For starters, Republicans would limit how much money people can borrow from the federal government to pay for their education. Among other measures, the Senate plan would: Cap unsubsidized student loans at $20,500 per year and $100,000 lifetime, for graduate students; Cap borrowing for professional degrees, such as those for doctors and lawyers, at $50,000 per year and $200,000 lifetime; Add a lifetime borrowing limit for all federal student loans of $257,500; Cap parent borrowing through the federal Parent PLUS loan program at $20,000 per year per student and $65,000 lifetime; Eliminate grad PLUS loans. These allow grad students to borrow up to their entire cost of attendance minus any federal aid. Going forward, there would be just two repayment plan choices for new borrowers: Student loan borrowers could enroll in either a standard repayment plan with fixed payments or an income-based repayment plan known as the Repayment Assistance Plan, or RAP. The bill would also nix the unemployment deferment and economic hardship deferment, both of which student loan borrowers use to pause their payments during periods of financial difficulty. — Jessica Dickler and Annie Nova The Senate bill creates a tax deduction for car loan interest, similar to a provision in the House bill. Certain households would be able to deduct up to $10,000 of annual interest on new auto loans from their taxable income. The tax break would be temporary, lasting from 2025 through 2028. There are some eligibility restrictions. For example, the deduction's value would start to fall for individuals whose annual income exceeds $100,000; the threshold is $200,000 for married couples filing a joint tax return. Cars must also be assembled in the U.S. In practice, the tax benefit is likely to be relatively small, experts said. "The math basically says you're talking about [financial] benefit of $500 or less in year one," based on the average new loan, Jonathan Smoke, chief economist at Cox Automotive, an auto market research firm, recently told CNBC. — Greg Iacurci The Senate passed the No Tax on Tips Act in late May, a standalone legislation that would create a federal income tax deduction of up to $25,000 per year on tip income, with some limitations. The tax break would apply to workers who typically receive cash tips reported to their employer for payroll tax withholdings, according to the summary of the bill. The Senate version of the One Big Beautiful Bill Act includes a similar provision: qualifying individuals would be able to claim a deduction of up to $25,000 for qualified tips. However, the Senate version would not apply to taxpayers whose income exceeds $150,000, or $300,000 for joint filers. Should the bill go into effect as drafted, the Secretary of the Treasury will publish a list of occupations that typically received tips on or before Dec. 31, 2024. The provision would apply to taxable years between Dec. 31, 2024, and Dec. 31, 2028. — Ana Teresa Solá The House and Senate bills would provide a temporary tax break for overtime pay, a campaign promise from Trump. The House-approved bill would create a deduction for "qualified overtime compensation" of $160,000 or less from 2025 to 2028. The deduction is "above the line," meaning the tax break is available regardless of whether you itemize deductions. By contrast, the Senate bill offers a maximum $12,500 above-the-line deduction for overtime pay, and $25,000 for married couples filing jointly, from 2025 to 2028. The tax break begins to phase out once earnings exceed $150,000, and $300,000 for joint filers. — Kate Dore EV, clean energy tax credits The Senate bill, like its House counterpart, would end consumer tax credits tied to clean energy. It would end a $7,500 tax credit for households that buy or lease a new electric vehicle, and a $4,000 tax credit for buyers of used EVs. These tax credits would disappear after Sept. 30, 2025. Additionally, it would scrap tax breaks for consumers who make their homes more energy-efficient, perhaps by installing rooftop solar, electric heat pumps, or efficient windows and doors. These credits would end after Dec. 31, 2025. An aerial view shows solar panels atop the roofs of homes on February 25, 2025 in Pasadena, California. Mario Tama | Getty Images 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. The tax breaks are currently slated to be in effect for another seven or so years, through at least 2032. — Greg Iacurci Section 199A pass-through business deduction Another key provision in the House and Senate bills could offer a bigger deduction for so-called pass-through businesses, which includes contractors, freelancers and gig economy workers. Enacted via Trump's 2017 tax cuts, the Section 199A deduction for qualified business income is currently worth up to 20% of eligible revenue, with some limits. This will expire after 2025 without action from Congress. The House-approved bill would make the provision permanent and expand the maximum tax break to 23% starting in 2026. Meanwhile, the Senate measure would make the deduction permanent but keep it at 20%. — Kate Dore
CNBC
01-07-2025
- Business
- CNBC
What the Senate Republican tax and spending bill means for your money
Senate Republicans on Tuesday approved their version of President Donald Trump's multi-trillion-dollar tax and spending package, which could broadly impact millions of Americans' wallets. Similar to the House's One Big Beautiful Bill Act advanced in May, the Senate legislation aims to make permanent Trump's 2017 tax cuts, while adding new tax breaks for tip income, overtime pay and auto loans, among other provisions. If enacted, the bill could also slash spending on social safety net programs such as Medicaid and SNAP, axe tax credits tied to clean energy and overhaul student loans. More from Personal Finance:Americans say this financial milestone makes you an adultAverage 401(k) savings rate is at record-high levelsThese are the top private, public colleges for financial aid The spending package could still see changes as it returns to the lower chamber for approval. But a House floor vote could come as this week to meet Trump's July 4 deadline. Here are some of the key provisions to watch — and how those measures could impact household finances. Follow along from start to finish, or use the table of contents to jump to the section(s) you want to learn more about. Since 2018, the $10,000 cap on the state and local tax deduction, known as 'SALT,' has been a critical issue for certain lawmakers in high-tax states like New York, New Jersey and California. The SALT deduction — including state and local income and property taxes — was unlimited for filers who itemized deductions before 2018. But the alternative minimum tax reduced the benefit for some wealthier Americans. A sticking point for some House lawmakers, the lower chamber approved a $40,000 SALT limit starting in 2025. The higher tax break would begin in 2025 and phase out over $500,000. The Senate version of the bill would also lift the cap to $40,000 starting in 2025, with the phaseout starting above $500,000 of income. Both figures would increase by 1% yearly through 2029 and the $40,000 limit would revert to $10,000 in 2030. "If you raise the cap, the people who benefit the most are going to be upper middle-income," since lower earners typically don't itemize tax deductions, Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, previously told CNBC. — Trump's 2017 tax cuts temporarily boosted the maximum child tax credit to $2,000 from $1,000, an increase that will sunset after 2025 without an extension from Congress. If enacted, the Senate bill would permanently bump the biggest credit to $2,200 starting in 2025 and index this figure for inflation starting in 2026. Meanwhile, the House version of the bill lifts the top child tax credit to $2,500 from 2025 through 2028. After 2028, the credit's highest value would revert to $2,000 and be indexed for inflation. However, the proposed bills wouldn't help 17 million children from low-income families who don't earn enough to claim the full credit, according to Elaine Maag, senior fellow in the Urban-Brookings Tax Policy Center. — Both the House and Senate called for a temporary enhanced deduction for Americans ages 65 and over, dubbed a "bonus," in their respective versions of the "big beautiful" bill. The Senate proposed raising the deduction to $6,000 per qualifying individual, up from $4,000 proposed by the House. The full deduction would be available to individuals with up to $75,000 in modified adjusted gross income, and $150,000 if married and filing jointly. Notably, the Senate version would phase out at a faster rate for taxpayers who are above those thresholds. Ultimately, middle-income taxpayers may benefit most from the enhanced deduction, Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, recently told CNBC. The senior bonus is in lieu of eliminating taxes on Social Security benefits, which had been touted by the Trump administration, since changes to Social Security are generally prohibited in reconciliation legislation. As Republicans seek to slash federal spending, Medicaid, which provides health coverage for more than 71 million people, has been a target for those cuts in both House and Senate versions of the bill. The Senate version of the bill would cut more than $1 trillion from Medicaid, compared to more than $800 billion in cuts in the House version, according to Congressional Budget Office estimates. New federal work requirements would require beneficiaries ages 19 to 64 who apply for coverage or who are enrolled through an Affordable Care Act expansion group to work at least 80 hours per month. Adults may be exempt if they have dependent children or other qualifying circumstances such as a medical condition. Notably, the Senate version of the bill proposed stricter limits on exemptions for parents, limiting it to those with dependent children ages 14 and under. The proposed Medicaid changes would also make it so states would have to conduct eligibility redeterminations for coverage every six months, rather than every 12 months based on current policy. About 7.8 million people could become uninsured by 2034 due to Medicaid cuts, CBO has projected based on the House Senate and House versions of the "big beautiful" bill propose cuts to food assistance through the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps. The cuts in the Senate bill may ultimately affect more than 40 million people, according to the Center on Budget and Policy Priorities. That includes about 16 million children, 8 million seniors and 4 million non-elderly adults with disabilities, among others, according to CBPP, a nonpartisan research and policy institute. Many states would be required to pay a percentage for food benefits to make up for the federal funding cuts. If they cannot make up for the funding losses, that could result in cuts to SNAP benefits or states opting out of the program altogether, according to CBPP. The Senate proposal also seeks to expand existing work requirements to include adults ages 55 to 64 and parents with children 14 and over. Based on current rules, most individuals cannot receive benefits for more than three months out of every three years unless they work at least 20 hours per week or qualify for an exemption. For about 600,000 low-income households, food benefits could be cut by an average of $100 per month, according to Senate's version of Trump's budget bill also included a new savings account for children with a one-time deposit of $1,000 from the federal government for those born in 2024 through 2028. Starting in 2026, so-called "Trump accounts," a type of tax-advantaged saving account, would be available to all children under the age of eight years old who are U.S. citizens, largely in line with the House plan advanced in May. To be eligible to receive the initial seed money, both parents must have Social Security numbers. Parents would then be able to contribute up to $5,000 a year and the balance will be invested in a diversified fund that tracks a U.S. stock index. Earnings grow tax-deferred, and qualified withdrawals are taxed as long-term capital gains. Republican lawmakers have said these accounts will introduce more Americans to wealth-building opportunities and the benefits of compound growth. But some experts say a 529 college savings plan is a better alternative because of the higher contribution limits and tax changes are in store for student loan borrowers. For starters, Republicans would limit how much money people can borrow from the federal government to pay for their education. Among other measures, the Senate plan would: Going forward, there would be just two repayment plan choices for new borrowers: Student loan borrowers could either enroll in a standard repayment plan with fixed payments, or an income-based repayment plan known as the "Repayment Assistance Plan," or RAP. The bill would also nix the unemployment deferment and economic hardship deferment, both of which student loan borrowers use to pause their payments during periods of financial Senate bill creates a tax deduction for households on car loan interest, similar to a provision in the House bill. Certain households would be able to deduct up to $10,000 of annual interest on new auto loans from their taxable income. The tax break would be temporary, lasting from 2025 through 2028. There are some eligibility restrictions. For example, the deduction's value would start to fall once an individual's annual income exceeds $100,000; the threshold is $200,000 for married couples filing a joint tax return. Cars must also be U.S.-assembled. In practice, the tax benefit is likely to be relatively small, experts said. "The math basically says you're talking about [financial] benefit of $500 or less in year one," based on the average new loan, Jonathan Smoke, chief economist at Cox Automotive, an auto market research firm, recently told Senate passed the No Tax on Tips Act in late May, a standalone legislation that would create a federal income tax deduction of up to $25,000 per year, with some limitations. The tax break would apply to workers who typically receive cash tips reported to their employer for payroll tax withholdings, according to the summary of the bill. The Senate version of the OBBBA Act includes a similar provision: If enacted, qualifying individuals can claim a deduction of up to $25,000 for qualified tips. However, the Senate version would not apply to taxpayers whose income exceeds $150,000, or $300,000 for joint filers. Should the bill go in effect as drafted, the Secretary of the Treasury will publish a list of occupations that typically received tips on or before December 31, 2024. The provision would apply to taxable years between December 31, 2024 and December 31, 2028. — Another campaign promise from Trump, the House and Senate bills would also provide a temporary tax break for overtime pay. The House-approved bill would create a deduction for "qualified overtime compensation" of $160,000 or less from 2025 to 2028. The deduction is "above-the-line," meaning the tax break is available regardless of whether you itemize deductions. By contrast, the Senate bill offers a maximum $12,500 above-the-line deduction ($25,000 for married couples filing jointly) for overtime pay from 2025 to 2028. The tax break begins to phase out once earnings exceed $150,000 ($300,000 for joint filers). — The Senate bill, like its House counterpart, would axe consumer tax credits tied to clean energy. It would end a $7,500 tax credit for households that buy or lease a new electric vehicle, and a $4,000 tax credit for buyers of used EVs. These tax credits would disappear after Sept. 30, 2025. Additionally, it would scrap tax breaks for consumers who make their homes more energy-efficient, perhaps by installing rooftop solar, electric heat pumps, or efficient windows and doors. These credits would end after Dec. 31, 2025. 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. The tax breaks are currently slated to be in effect for another seven or so years, through at least 2032. Another key provision in the House and Senate bills could offer a bigger deduction for so-called pass-through businesses, which includes contractors, freelancers and gig economy workers. Enacted via Trump's 2017 tax cuts, the Section 199A deduction for qualified business income, or QBI, is currently worth up to 20% of eligible revenue, with some limitations. This will expire after 2025 without action from Congress. The House-approved bill would make the provision permanent and expand the maximum tax break to 23% starting in 2026. Meanwhile, the Senate measure would make the deduction permanent but keep it at 20%. —
