The One Big Beautiful Bill, which passed Congress on Thursday and is expected to be signed by President Donald Trump on Friday, will introduce significant changes to income tax that will affect Americans across various income brackets.
According to an analysis by the Tax Policy Center, approximately 85% of households are projected to receive a tax cut in 2026 following the passage of the Big Beautiful Bill. However, by 2030, this figure is estimated to drop to around 70%, with nearly 60% of the tax benefits directed toward individuals earning $217,000 or more annually.
Here’s a breakdown of the tax changes by income bracket.
Low-Income Households (Under $50,000 AGI)
- Households earning $40,000–$50,000: Receive a $630 tax cut (1.5% increase in after-tax income).
- Households earning below $34,600 (bottom quintile): Get a $150 tax cut (0.8% increase).
Child Tax Credit (CTC): Permanently raised to $2,200 (inflation-adjusted for 2025), with a refundable Additional Child Tax Credit (ACTC) of $1,400.
Standard Deduction: Permanently increased to $15,750 for single filers and $31,500 for joint filers, with an additional $750 from 2025 to 2028.
Offsets: Approximately $1 trillion in Medicaid cuts could leave 12 million uninsured by 2034, and stricter SNAP work requirements (80 hours/month) might disenroll millions, effectively negating some tax benefits.
Middle-Income Households ($50,000–$200,000 AGI)
- Households earning $50,000–$75,000: Gain a $1,000 tax cut (1.9% increase).
- Households earning $75,000–$100,000: Receive a $1,700 tax cut (2.3% increase).
- Households earning $100,000–$200,000: Get a $3,000 tax cut (2.5% increase).
No Tax on Tips/Overtime: Deductions for tips (up to $25,000) and overtime (up to $12,500 for single filers, $25,000 for joint filers) for incomes under $150,000 (single) or $300,000 (joint), effective from 2025 to 2028.
SALT Deduction: Increased to $40,000 (2025–2029, inflation-adjusted), phasing out at $500,000, benefiting residents in high-tax states.
High-Income Households ($217,000+ AGI)
- Households earning $217,000–$318,000: See a $5,400 tax cut (2.6% increase).
- Households earning $318,000–$460,000 (90th–95th percentile): Gain $8,900 (3.1% increase).
- Households earning $460,000–$1.1 million: Receive $21,000 (4.4% increase). The top 1% (income above $1.1 million) and 0.1% (income above $5 million) receive average increases of 3.5% and 3.2%, respectively, with an average of $12,500 for the top quintile.
Estate Tax: Exemption rises to $15 million for single filers and $30 million for joint filers, made permanent from 2026.
QBI Deduction: Increased to 23% for pass-through businesses, permanent.
Other New Tax Cuts
- Senior Deduction: A $6,000 deduction for individuals over 65, effective from 2025 to 2028, reducing Social Security tax liability.
- Car Loan Interest: Up to $2,500 deductible for incomes under $150,000, effective from 2025.
- Temporary Provisions: The senior, tips, and overtime deductions are set to expire in 2028, with 70% of households projected to retain tax breaks by 2030, down from 85% in 2026.
