What Is Trump’s New Tax and Spending Bill?
The newly passed GOP-backed tax and spending bill, expected to be signed by President Donald Trump on July 4, is a massive 900-page package that reshapes the financial and welfare structure of the United States. Unlike previous short-term tax extensions, this bill offers a mix of permanent and temporary policy shifts—many timed to benefit voters before Trump’s term ends.
It includes:
- Tax code reforms
- Medicaid eligibility changes
- New deductions for workers and seniors
- Adjustments to Social Security taxation
- Expanded child tax credits
- Revisions to the SALT deduction cap
Let’s break down the most important sections, their timelines, and what they mean for you.
Medicaid: Work Requirements Starting 2027
One of the most controversial parts of Trump’s bill is the introduction of work requirements for Medicaid recipients across the country.
What’s Changing?
Starting January 1, 2027, all “able-bodied” adults on Medicaid will be required to:
- Work at least 80 hours per month, or
- Qualify for an exemption (e.g., student, caregiver, or disabled).
This applies even to parents of children over age 13, which significantly narrows the group of people automatically exempt from working.
Who Will Be Affected?
- Low-income Americans with part-time or unstable jobs.
- Disabled individuals who struggle with paperwork or medical documentation.
- States that rely heavily on federal Medicaid funding.
The effect will vary by state since states control enforcement, but millions may lose coverage if they cannot meet the new rules.
Tax Cuts: Permanent Extension of the 2017 Trump Tax Plan
A major win for conservatives, this bill locks in the 2017 Tax Cuts and Jobs Act provisions permanently.
What It Means:
- Individual income tax brackets and corporate tax rates will stay low indefinitely.
- High-income earners benefit the most due to larger percentage deductions.
- Middle-class Americans will continue to see modest tax relief.
This removes the sunset clause in the original 2017 law, which was set to expire this year.
Tips & Overtime: Temporary Tax Relief for Workers
Trump pledged to make tips and overtime income tax-free, and this bill partially fulfills that.
Key Details:
- Starting 2025, workers can deduct:
- Up to $25,000 in tips
- Up to $25,000 in overtime
- This deduction is temporary and ends on December 31, 2028
While this benefits many in the service, hospitality, and labor sectors, the relief is short-lived and does not apply to income beyond the thresholds.
Child Tax Credit: Bigger & Inflation-Adjusted
The Child Tax Credit (CTC) will rise from $2,000 to $2,200 per child, effective 2025.
Even Better:
- The credit will be indexed to inflation, meaning it increases automatically each year.
- This version has no expiration date, offering long-term financial support to families.
This change prevents the credit from reverting to $1,000, as it was scheduled to do after 2025 under prior law.
SALT Deduction: Higher Cap Through 2030
The State and Local Tax (SALT) deduction cap, a hot-button issue in high-tax states, gets a temporary boost.
New Cap Timeline:
- Raised to $40,000 starting in 2025
- Begins to phase out for individuals earning over $500,000
- Expires in 2030, when the cap returns to $10,000
This is a major win for residents of New York, California, New Jersey, and other states with high property and income taxes.
Social Security Tax Deduction: Seniors Get a Break (Temporarily)
Seniors will receive a temporary tax break on Social Security benefits between 2025 and 2029.
Who Qualifies?
- Seniors 65 and older can deduct up to $6,000 from taxable income.
- No Social Security taxes for:
- Individuals earning under $75,000
- Couples earning under $150,000
Who Doesn’t Qualify?
- Seniors under 65
- Those already exempt from paying taxes on benefits
- High-income retirees
- Early claimants before age 65
While this is a popular measure among retirees, it’s important to remember it’s only temporary — and will expire unless extended.
Policy Start and End Timeline At a Glance
| Policy Change | Starts | Ends |
|---|---|---|
| Medicaid Work Requirements | Jan 1, 2027 | — (Ongoing) |
| Tax Cuts from 2017 Act Extended | Immediate (2024) | Permanent |
| Tips & Overtime Tax Deduction | Jan 1, 2025 | Dec 31, 2028 |
| Child Tax Credit Increase | Jan 1, 2025 | No Expiration |
| SALT Deduction Cap Raised | Jan 1, 2025 | Dec 31, 2030 |
| Social Security Tax Deduction | Jan 1, 2025 | Dec 31, 2029 |
Analysis: What This Means for Americans
- Low-income Americans: Face stricter welfare access (Medicaid) but may benefit from tip and overtime tax deductions.
- Middle-class families: Benefit from the Child Tax Credit expansion and continued tax cuts.
- High earners: Get long-term relief from SALT deductions and permanent lower tax brackets.
- Seniors: Receive targeted Social Security relief — but only for a few years.
Final Thoughts: Political and Economic Implications
This bill reflects Trump’s effort to cement his economic legacy while appealing to voters ahead of the next presidential election. Many provisions are scheduled to expire in 2028–2030, aligning with the end of a possible second term.
While the bill is likely to help Trump’s approval among working-class voters and retirees, it may face legal and political challenges, especially around Medicaid reforms.