Republican lawmakers have released more information about their long-awaited reconciliation tax bill, which includes proposed cuts to Medicaid and clean energy projects, as well as lower taxes for high-income Americans.
The measures proposed by the House Ways and Means Committee on Monday, dubbed “THE ONE, BIG, BEAUTIFUL BILL” in honor of President Donald Trump, reflect some of Trump’s campaign promises, such as lower taxes on tips and overtime.
According to a preliminary analysis by the Urban Institute’s Tax Policy Center, the proposal would result in an average tax cut of $2,800 in 2026, compared to what households would pay if the 2017 tax breaks expired.
Nearly 70% of the cuts would go to people earning $217,000 or more. However, the numbers are still in flux, and they are likely to change over the next few weeks.
Republicans have little wiggle room to pass the bill—they need support from nearly every member, and divisions have already emerged over Medicaid cuts, clean energy cuts, and the proposed increased limit on the state and local tax deduction.
The bill would increase the federal deficit by $4.9 trillion over the next decade. However, Republicans believe revenue from Trump’s tariffs will offset some of this.
The Ways and Means Committee will meet on Tuesday to discuss the plan. Here’s what is currently available for individuals.
Medicaid cuts total $880 billion
Republicans have proposed $880 billion in cuts to Medicaid, the federal health care program for the poorest Americans, to pay for some of their sweeping tax cuts. This has already become one of the most contentious aspects of the legislation, with Democratic lawmakers and even some Republicans, including Missouri Sen. Josh Hawley, condemning the cuts.
According to the nonpartisan Congressional Budget Office, Republican proposals could result in millions of Americans losing health care coverage.
Cuts taxes on tips and overtime through 2029
The bill would reduce taxes on tips and overtime for some workers beginning in 2025 and ending in 2028. The bill’s tips section attempts to limit who can qualify for the tax break, preventing higher-wage workers from taking advantage of it. It specifies that only employees who typically receive tips are eligible, and there is a $160,000 income limit.
Increases standard deduction
The bill temporarily increases the standard deduction by $1,000 until 2029.
Rather than eliminating Social Security taxes, as Trump promised on the campaign trail, it increases the standard deduction for seniors aged 65 and older by $4,000 from 2025 to 2028. This additional deduction is phased out for individuals earning $75,000 ($150,000 for married couples).
Increases SALT deduction
The state and local tax deduction, or SALT, would increase from $10,000 to $30,000 for married couples. This is a boon to high-tax states like New York and California, and lawmakers in those states want the deduction to be even higher. The SALT cap was reduced to $10,000 during Trump’s first term.
Increases child tax credit
The bill also temporarily increases the child tax credit from $2,000 to $2,500 until 2029.
Increases estate tax exemption
The federal estate tax exemption for individuals will be increased to $15 million.
Creates car loan interest deduction
Those who own a car made in the United States can deduct some car loan interest, though this provision gradually phases out for those earning $100,000 or more per year.
Allows more people to deduct charitable donations
While most taxpayers can only deduct charitable donations if they itemize their taxes, the bill would allow some to deduct up to $150 per year ($300 for married couples) when taking the standard deduction.
Creates tax-preferred child savings account
The bill establishes a new tax-favored savings account for children dubbed the “money account for growth and advancement,” or MAGA account. Parents could invest $5,000 per year, and the earnings could be used to pay for school or job training, purchase a home, or start a small business. Those born between 2025 and 2028 would receive $1,000.
Sen. Ted Cruz, R-Texas, told Semafor that the accounts would help children in the U.S. start saving and reap the benefits of compound interest.
Eliminates EV tax credits
Starting next year, President Joe Biden’s $7,500 credit for purchasing new electric vehicles will be eliminated. Renewable energy tax credits would be phased out.
New taxes on remittances
Non-citizens in the United States could face a new 5% tax on money sent abroad, while American citizens would be exempt.
Tax on university endowments
Trump plans to levy a new tax on private university endowments, targeting prestigious institutions such as Harvard. The largest endowments could have their investment income taxed at up to 21%.
Eliminates tax-exempt status for ‘terrorist’ supporters
Another provision would allow the State Department to revoke tax-exempt status for “terrorist-supporting” non-profit organizations, as determined by the agency.
