July 5 :
In a landmark move that reshapes America’s fiscal direction, President Trump officially signed the "One Big Beautiful Bill Act" into law on July 4, 2025, with most provisions taking effect on January 1, 2026. As a CPA in private practice, I am writing this to give my clients, readers, and community a clear, honest breakdown of what this new law means for your wallet, your benefits, and your financial future. This bill is now the law of the land — not a proposal, not a draft.
Key Highlights of the Law
1. Permanent Extension of 2017 Tax Cuts
Individual income tax brackets remain lowered.
Standard deduction stays doubled: $13,850 (single) and $27,700 (married filing jointly).
Child Tax Credit increased slightly to $2,200 per qualifying child.
The 20% Qualified Business Income (QBI) deduction remains for small business owners.
2. Trump Accounts Introduced
A new tax-deferred savings account to help families save for a child's future.
Contribution limit: $5,000/year per child under 18.
Tax-deductible contributions.
Earnings grow tax-free; withdrawals for education, first home, or entrepreneurship are tax-free.
Phase-out begins for married couples with income over $350,000.
3. Federal Income Tax Exemption on Tips & Overtime (2026–2028)
For employees earning less than $150,000.
Tips reported on W-2 are not taxed federally.
Overtime pay exempt from federal income tax (not payroll tax).
4. SALT Deduction Cap Temporarily Increased
Raised to $40,000 for joint filers (income under $500,000).
Effective beginning in tax year 2025 filings.
Reverts to $10,000 after 5 years.
5. New Taxes & Revenue Raisers
1% tax on remittances (money sent abroad): Applies only to remittances made by U.S. residents and citizens to foreign recipients. Business transfers and payments under $100 are exempt.
10% excise tax on private college endowment investment income.
Large-scale IRS funding remains intact for enforcement.
Spending Side: Where the Money Goes
1. Military and Defense
$150 billion increase over 10 years.
Funds the new "Golden Dome" missile defense system.
2. Border Security
$150 billion allocated to expand physical border infrastructure.
Additional funds to ICE, deportation operations, and immigration courts.
3. Infrastructure
$12.5 billion for air traffic control modernization.
No major funding for renewable energy or high-speed rail.
Cuts to Social Programs
1. Medicaid Overhaul
Ends provider taxes.
Requires able-bodied adults without dependents to work or participate in job training for 20 hours/week.
States allowed to impose additional eligibility checks.
Estimated 10–12 million enrollees at risk of losing coverage.
2. SNAP (Food Stamps)
Expands work requirements to recipients age 18–64.
States must share funding responsibility with federal government.
3. Climate & Environment
Clean vehicle and solar credits eliminated by 2027.
Restrictions on environmental regulation enforcement funding.
4. Planned Parenthood
Federal funding for clinics that refer or perform abortions eliminated.
Take-Home Pay Impact: Examples
Single Worker, $50,000 Income, with $5,000 in Tips
Savings: ~$600 from tax-free tips + ~$900 from 2017 rate extension.
Married Couple, $120,000 Joint Income, 2 Kids
Savings: ~$1,800 from rates + $400 from child tax credit increase + possible $1,000/year in Trump Account deductions.
Small Business Owner, $180,000 Income (LLC)
QBI deduction preserved = ~$7,200 in tax savings.
SALT deduction could help in high-tax states.
High-Income Household, $500,000+
Faces phase-outs on SALT, Trump Accounts.
Higher effective rates due to SALT cap and endowment taxes if donating.
Final Thoughts
This is one of the most sweeping tax and spending packages in modern history. While many households will see modest tax relief and expanded savings tools, there are also deep cuts to safety-net programs that millions depend on.
From a CPA's standpoint, the planning opportunities are enormous, but so are the risks. Families should re-evaluate their tax projections, small business owners should consider maximizing QBI strategies, and lower-income households should review their eligibility for Medicaid and SNAP benefits.
This law is here. It's real. The numbers are locked in, and your next return will reflect it. If you need help adjusting to the new reality, talk to a professional.
(Vinod George Abraham, MS (Tax), CISA, CPA is a licensed Certified Public Accountant in private practice focused on taxation, estate planning, and financial guidance for families and small businesses.)
