After months of heated debate and partisan gridlock, President Trump signed the Big Beautiful Bill into law on July 4th, making it the most sweeping policy achievement of his second term to date. This landmark legislation includes major changes to the U.S. tax code. Today, I want to break down some of the key financial elements of the new law and how they might affect you directly.
First and foremost, the bill makes permanent the individual tax rates initially enacted in 2017, which were previously set to expire at the end of this year. According to a Tax Policy Center study, the average middle-class household faced an average tax increase of approximately $2,000 without this extension due to bracket shifts from 12% to 15% and from 22% to 25%. This law ensures that those rates stay locked in.
But the bill doesn’t stop there. It introduces a highly publicized change by eliminating federal income tax on both tips and overtime pay. This means hourly workers, especially those in hospitality, healthcare, and blue-collar industries, will keep more of what their hard work has produced.
The law also expands several existing tax benefits. For seniors, it includes a new senior tax deduction that provides an additional bonus to the standard tax deduction all filers receive. For single filers the amount is $6,000 and for married couples it is $12,000 if both spouses are over age 65. The law also increases the Child Tax Credit from $2,000 to $2,200; and raises the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for individuals with a modified adjusted gross income under $500,000.
One of the most unique features of the bill is the creation of “Trump Accounts,” a new government-backed savings initiative. For every child born to American citizens between 2025 and 2028, the government will automatically open a savings account and deposit $1,000 into it. Parents can then contribute up to $5,000 annually, with the funds growing tax-free until the child turns 18. If used for qualified purposes like education or job training, withdrawals are taxed at capital gains rates. Otherwise, standard income tax and a 10% penalty may apply. Think of it as a hybrid between a college savings account and a Roth IRA intended to promote long-term financial planning from birth.
Although it is popular with many working-class voters, the bill has drawn sharp criticism from both sides of the aisle. Despite significant cuts to several government welfare programs such as SNAP (food stamps) and Medicaid, the Congressional Budget Office projects the law will still add between $2.8 and $3.4 trillion to the national deficit over the next decade. Many argue that while some provisions help everyday Americans, the largest benefits like expanded estate tax exemptions and business deductions overwhelmingly favor the wealthy.
Only time will reveal whether the Big Beautiful Bill lives up to its name. What’s clear is that the legislation represents a bold shift in economic policy, one that prioritizes lower taxes, work incentives, and family-focused savings at the cost of increased federal debt and existing welfare programs. Whether you view it as a historic win for the middle class or an expensive gamble, one thing is certain: this bill will have a direct impact on the financial lives of millions of Americans, including you.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)