Trump enacts colossal legislative act - insights into how it affects your finances
The tax and spending bill, signed into law by President Donald Trump on July 4, 2021, has significant implications for American taxpayers and federal programs, often referred to as the "big, beautiful bill."
**1. Permanent Extensions of the 2017 Tax Cuts and Jobs Act (TCJA):** - The bill largely makes permanent many provisions of the 2017 TCJA that were previously set to expire. This includes permanent lower income tax rates and expanded business expensing provisions, providing ongoing tax relief that had been temporary under the original act.
**2. New Tax Breaks and Changes Favoring Various Groups:** - **Increased SALT Deduction Cap:** The bill raises the state and local tax (SALT) deduction cap from $10,000 to $40,000 for married couples earning up to $500,000, providing substantial tax relief to many high-income taxpayers in states with high taxes. - **Child Tax Credit and Standard Deduction:** Lower- and middle-income filers benefit from an increased Child Tax Credit and slightly higher standard deduction amounts. - **Tax Exemptions for Workers and Retirees:** The bill exempts qualified tips from federal income tax, and overtime pay will become fully deductible after 2025. Retirees receive a partial tax break on Social Security benefits, though full exemption was not achieved. - **New Auto Loan Interest Deduction:** Taxpayers can now deduct interest paid on auto loans, a new benefit not available previously. - **Trump Savings Accounts:** The legislation introduces $1,000 tax-deferred accounts for newborns, aimed at supporting education, housing, or retirement expenses.
**3. Impact on Low-Income Taxpayers and Federal Programs:** - While there are some increased benefits for lower-income taxpayers through the Child Tax Credit and standard deduction, the bill includes significant spending cuts to Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and other health care and nutrition programs. This could leave millions without health insurance or reduce benefits for vulnerable populations. - The bill adds federal work or community engagement requirements to Medicaid and SNAP and shifts more administrative costs to the states, tightening eligibility and access for these programs.
**4. Revenue and Deficit Implications:** - The Congressional Budget Office estimates the bill would add approximately $3.4 trillion to the federal deficit over the next decade due to the permanent tax cuts and increased spending in areas like defense, border security, and energy production. The bill attempts to offset these costs through spending cuts to health and nutrition programs and repeal of certain energy tax credits.
**Summary Table of Key Changes:**
| Area | Change/Impact | |-------------------------------|-------------------------------------------------------------------------------------------------| | TCJA Provisions | Most tax cuts made permanent, including business expensing and lower tax rates | | SALT Deduction | Cap raised from $10,000 to $40,000 for certain taxpayers | | Child Tax Credit & Deductions | Increased Child Tax Credit and slightly higher standard deduction for lower and middle income | | Worker & Retiree Benefits | Tax exemption on qualified tips, future overtime deductibility, partial Social Security tax break| | New Deductions | Deduction for auto loan interest payments | | New Initiatives | Trump savings accounts for newborns | | Federal Spending Cuts | Cuts to Medicaid, SNAP, Planned Parenthood funding; added work requirements for assistance programs | | Deficit Impact | Adds $3.4 trillion to deficits over 10 years |
In summary, the bill solidifies and expands tax benefits, particularly benefiting upper-income taxpayers through increased SALT deductions and permanent TCJA tax cuts, while offering some relief for lower-income filers. Concurrently, it imposes stricter conditions and cuts on health and nutrition programs, potentially harming low-income individuals dependent on these supports.
1. Personal-finance opportunities: The bill introduces Trump Savings Accounts, tax-deferred accounts for newborns, aimed at supporting education, housing, or retirement expenses, offering a unique personal-finance opportunity.
2. Investing in business and personal-finance: The bill largely makes permanent many provisions of the 2017 TCJA that were previously set to expire, including permanent lower income tax rates and expanded business expensing provisions, providing ongoing tax relief and incentives for investments in business and personal-finance planning.
