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After a month of Congressional back-and-forth and a dizzying number of incremental updates in the news, you probably just want to know what made it into the final version of the “One Big Beautiful Bill” — and why it matters for you. In short, the sweeping tax and spending package could have a significant impact on household finances. Let’s dive into five ways it could affect your wallet:1) Cemented tax cuts: The legislation extends many of the temporary tax cuts and standard deduction changes that were passed in 2017, including reduced individual income tax rates that would have expired at the end of this year. According to the nonpartisan Tax Foundation, the legislation prevents tax increases on an estimated 62% of taxpayers. The child tax credit — which was set to return to $1,000 from $2,000 per child next year — has been permanently hiked to $2,200.
2) Temporary tax break on qualifying tips and overtime: While there are several caveats, up to $25,000 of tips and $12,500 in OT pay (the portion earned in excess of the regular rate) per year will be tax deductible from 2025 to 2028. Both breaks are phased out for workers who earn over $150,000 in adjusted gross income, and the income would still be subject to Social Security and Medicare taxes.
Not everyone will be allowed to deduct tips — just people in roles that customarily receive tips — though the list of permissible occupations is expected to include most service workers, like waiters. That said, anyone who doesn’t earn enough to pay federal taxes in the first place (think college students working part-time) won’t benefit. In 2022, for example, 37% of tipped workers didn’t incur any federal income taxes, according to the Budget Lab at Yale.
3) Scaled-back student loan program: The legislation reduces payment plan options on federal student loans and imposes new borrowing limits for graduate students and parent borrowers.
Notably, it eliminates the Grad PLUS Program beginning in July 2026, meaning graduate students can no longer rely on federal loans to cover the full cost of a graduate program: Instead, they can borrow up to $20,500 per year (and $100,000 in total) unless they’re pursuing a professional degree in something like law or medicine. Then the cap is $50,000 per year (and $200,000 in total.)
It also phases out several income-driven payment plans, including the newest SAVE plan, in favor of a new option called the Repayment Assistance Plan. To see how monthly payments could change, here’s a new calculator from The College Investor.
4) Cuts to social services: The legislation cuts federal spending on programs like Medicaid and SNAP, which provide health coverage and food assistance to lower-income Americans. Over the next 10 years, new work-related requirements could reduce the number of SNAP recipients by 3.2 million and leave 7.8 million more people without health insurance, according to previous Congressional Budget Office estimates. The changes in the bill — also intended to reduce fraud and abuse — shift more of the funding burden onto the states, though it remains to be seen how individual states will respond.
5) A bigger deficit: When the government spends more than it collects in taxes, it creates a national budget deficit. While deficits are common, a growing deficit can potentially raise consumer interest rates, hurt bond portfolios, or lead to an economic downturn. The legislation raises the federal debt ceiling by $5 trillion, and could add $3.4 trillion to the deficit over the next decade, according to CBO estimates.
Related Reading
Tax Changes Under Trump’s ‘Big Beautiful Bill’ — in One Chart (CNBC) How Trump's Big Spending Bill Will Overhaul Repayment for Millions of Student-Loan Borrowers (Business Insider via MSN) When Will U.S. Workers See ‘No Tax on Overtime, Tips' Policies in Place? (NBC)Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
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