Weekend Read - What's Really in the New Tax Bill
09/09/2025Congress recently passed a major tax bill, and while it makes many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) permanent, there are also some significant new additions. I went through it to clarify the final changes. Here is a straightforward breakdown:
The 2017 Tax Rates Are Now Permanent2
The lower tax rates from the 2017 tax overhaul were set to expire after 2025, which would have led to increased rates across the board. Instead, these rates will now remain:
This change alone accounts for about $3 trillion in reduced federal revenue over the next decade, roughly 70% of the bill’s total cost, and is the primary driver of the projected deficit increase1.
Medicare: Indirect Cuts Through Budget Rules2
While the new bill doesn’t explicitly cut Medicare benefits, it triggers automatic spending reductions through a law known as PAYGO (Pay-As-You-Go). Because the tax cuts in the bill add significantly to the federal deficit, PAYGO rules automatically trigger up to a 4% annual reduction in Medicare spending starting as early as 2026 unless congress votes to wave them.
These cuts shouldn’t affect what Medicare covers, but they could reduce what Medicare pays to doctors and hospitals. This could lead to fewer providers accepting Medicare and the potential for premiums to rise as providers compensate for lost revenue.
Larger Standard Deduction Is Permanent and Higher2
The standard deduction introduced in 2017 will remain and increase slightly:
These amounts will adjust for inflation.
Medicaid: Stricter Rules Expected to Drive Major Reductions2
The reduced spending on Medicaid are not from direct benefit cuts, but from new work requirements.
Work requirements will now apply to most adults under age 65. To stay enrolled, individuals must work at least 80 hours per month.
Eligibility checks must now happen every six months, instead of once per year.To cushion the blow, the bill sets aside $50 billion from 2026–2030 through a new Rural Health Transformation Program. This funding is welcome relief, but obviously it is unlikely to fully make up for the broader cuts.
The bill reshapes Medicaid by making eligibility more conditional. While some view these steps as needed reforms, others see them as changes that will increase the number of uninsured Americans, especially among low-income and vulnerable populations.
SNAP (Food Stamps): Eligibility Tightening and Shifting Responsibilities to States2
The bill makes significant changes to (SNAP) that are similar to the changes to Medicaid largely in the form of new eligibility rules and funding structures.
The new bill required most adults aged 18 to 64 to work 80 hours per month to maintain eligibility.
States will now be responsible for 5% of benefit payments and 75% of administrative costs, whereas the federal government previously covered nearly all benefit expenses. Additionally, if a state's error rate in processing SNAP benefits exceeds 6%, it will be required to cover an even greater portion of the program’s benefit costs. These provisions are intended to encourage greater accuracy and accountability in program administration but could place added financial pressure on state budgets.
New $6,000 Deduction for Seniors2
You probably got an email like I did over the weekend from the Social Security Administration. That email was very misleading claiming:
“The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries, providing relief to individuals and couples. Additionally, it provides an enhanced deduction for taxpayers aged 65 and older, ensuring that retirees can keep more of what they have earned.”
I can’t believe I’m saying this, but the email is simply not true. There is no specific provision in the law that eliminates federal taxes on Social Security benefits. What the law does contain is the enhanced $6,000 deduction for seniors. For many retirees with modest income, this deduction may reduce their taxable income enough to avoid triggering taxes on their Social Security, but this is an indirect result, not a new exemption.
To clarify, here’s how Social Security taxation currently works:
For Single Filers:
For Married Filing Jointly:
Because a large percentage of retirees live on relatively modest incomes, this new deduction may reduce income enough to eliminate tax for some, but not because Social Security benefits were specifically excluded from taxation.
If you’re 65 or older with income below $75,000 (single) or $150,000 (married), you now get an extra $6,000 deduction.
Child Tax Credit Increased2
The child tax credit increases from $2,000 to $2,200 per child and is now indexed to inflation, benefiting families long-term.
Temporary Increase in SALT Deduction2
The cap for state and local tax (SALT) deductions rises to $40,000 starting in 2025, increasing by 1% annually until 2030. After that, it reverts to $10,000. Households earning above $500,000 won’t qualify.
Deductions for Tips, Overtime, and Car Loans2
From 2025 to 2028, new deductions include:
Tips: Deduct up to $25,000 if earning less than $150,000 (single) or $300,000 (married).
Overtime Pay: Deduct up to $12,500 (single) or $25,000 (married), phasing out at the same income limits.
Car Loan Interest: Deduct up to $10,000 if the vehicle was assembled in the U.S., phasing out above $100,000 (single) or $200,000 (married).
Introducing the “Trump Account” for Children2
This new savings account functions similarly to a traditional IRA but is specifically designed for children:
Eligibility: Only children born between 2025 and 2028 qualify.
Annual Contributions: Up to $5,000 annually.
Government Contribution: $1,000 initial seed money.
Withdrawals: At age 18, the child can withdraw up to 50% for specific purposes like education, homeownership, or starting a business. The remaining balance is fully available at age 30.
Tax Treatment: Contributions are after-tax, so only the account’s earnings (not your original contributions) are taxed at withdrawal, similar to traditional IRAs.
Investment Options: Investments limited to low-cost index funds until age 18.
This account aims to encourage saving from a young age and provide a financial head start in adulthood.
Dependent Care FSA Limit Increased2
The limit for dependent care FSAs rises from $5,000 to $7,500. I can speak from personal experience that my kids day care costs will use up all of that and the increase is welcome.
Charitable Deduction for Non-Itemizers2
Even if you don’t itemize, you can now deduct charitable contributions up to:
$1,000 for single filers
$2,000 for married couples
This simplifies and encourages charitable giving.
EV Subsidies Ending Soon2
Federal electric vehicle subsidies will end after September 2025.
I hope you’ve found this summary helpful. Let me know if you have any questions.
If you’ve only recently joined my email list, you’ve missed out on many insights and updates that I've been sharing each week. Be sure to visit my blog to explore past content that you might find valuable.
Want to receive these weekly? Subscribe here
Enjoy your weekend,
Jeremy Raffer, MBA
Director & Wealth Manager
Author "Financial Planning for Widows"
m. 201-747-2705
w. rafferwealthmanagement.com
e. [email protected]
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652.
1 https://taxfoundation.org/research/all/federal/trump-tax-cuts-2025-budget-reconciliation/
2 https://www.congress.gov/bill/119th-congress/house-bill/1/text
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results
AdTrax 8143581.1 Exp 7/26
The 2017 Tax Rates Are Now Permanent2
The lower tax rates from the 2017 tax overhaul were set to expire after 2025, which would have led to increased rates across the board. Instead, these rates will now remain:
- 12% instead of 15%
- 22% instead of 25%
- 24% instead of 28%
- 32% instead of 33%
- 37% instead of 39.6%
This change alone accounts for about $3 trillion in reduced federal revenue over the next decade, roughly 70% of the bill’s total cost, and is the primary driver of the projected deficit increase1.
Medicare: Indirect Cuts Through Budget Rules2
While the new bill doesn’t explicitly cut Medicare benefits, it triggers automatic spending reductions through a law known as PAYGO (Pay-As-You-Go). Because the tax cuts in the bill add significantly to the federal deficit, PAYGO rules automatically trigger up to a 4% annual reduction in Medicare spending starting as early as 2026 unless congress votes to wave them.
These cuts shouldn’t affect what Medicare covers, but they could reduce what Medicare pays to doctors and hospitals. This could lead to fewer providers accepting Medicare and the potential for premiums to rise as providers compensate for lost revenue.
Larger Standard Deduction Is Permanent and Higher2
The standard deduction introduced in 2017 will remain and increase slightly:
- $15,750 for singles
- $31,500 for married couples
These amounts will adjust for inflation.
Medicaid: Stricter Rules Expected to Drive Major Reductions2
The reduced spending on Medicaid are not from direct benefit cuts, but from new work requirements.
Work requirements will now apply to most adults under age 65. To stay enrolled, individuals must work at least 80 hours per month.
Eligibility checks must now happen every six months, instead of once per year.To cushion the blow, the bill sets aside $50 billion from 2026–2030 through a new Rural Health Transformation Program. This funding is welcome relief, but obviously it is unlikely to fully make up for the broader cuts.
The bill reshapes Medicaid by making eligibility more conditional. While some view these steps as needed reforms, others see them as changes that will increase the number of uninsured Americans, especially among low-income and vulnerable populations.
SNAP (Food Stamps): Eligibility Tightening and Shifting Responsibilities to States2
The bill makes significant changes to (SNAP) that are similar to the changes to Medicaid largely in the form of new eligibility rules and funding structures.
The new bill required most adults aged 18 to 64 to work 80 hours per month to maintain eligibility.
States will now be responsible for 5% of benefit payments and 75% of administrative costs, whereas the federal government previously covered nearly all benefit expenses. Additionally, if a state's error rate in processing SNAP benefits exceeds 6%, it will be required to cover an even greater portion of the program’s benefit costs. These provisions are intended to encourage greater accuracy and accountability in program administration but could place added financial pressure on state budgets.
New $6,000 Deduction for Seniors2
You probably got an email like I did over the weekend from the Social Security Administration. That email was very misleading claiming:
“The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries, providing relief to individuals and couples. Additionally, it provides an enhanced deduction for taxpayers aged 65 and older, ensuring that retirees can keep more of what they have earned.”
I can’t believe I’m saying this, but the email is simply not true. There is no specific provision in the law that eliminates federal taxes on Social Security benefits. What the law does contain is the enhanced $6,000 deduction for seniors. For many retirees with modest income, this deduction may reduce their taxable income enough to avoid triggering taxes on their Social Security, but this is an indirect result, not a new exemption.
To clarify, here’s how Social Security taxation currently works:
For Single Filers:
- $0–$25,000: 0% taxed
- $25,001–$34,000: up to 50%
- Over $34,000: up to 85%
For Married Filing Jointly:
- $0–$32,000: 0% taxed
- $32,001–$44,000: up to 50%
- Over $44,000: up to 85%
Because a large percentage of retirees live on relatively modest incomes, this new deduction may reduce income enough to eliminate tax for some, but not because Social Security benefits were specifically excluded from taxation.
If you’re 65 or older with income below $75,000 (single) or $150,000 (married), you now get an extra $6,000 deduction.
Child Tax Credit Increased2
The child tax credit increases from $2,000 to $2,200 per child and is now indexed to inflation, benefiting families long-term.
Temporary Increase in SALT Deduction2
The cap for state and local tax (SALT) deductions rises to $40,000 starting in 2025, increasing by 1% annually until 2030. After that, it reverts to $10,000. Households earning above $500,000 won’t qualify.
Deductions for Tips, Overtime, and Car Loans2
From 2025 to 2028, new deductions include:
Tips: Deduct up to $25,000 if earning less than $150,000 (single) or $300,000 (married).
Overtime Pay: Deduct up to $12,500 (single) or $25,000 (married), phasing out at the same income limits.
Car Loan Interest: Deduct up to $10,000 if the vehicle was assembled in the U.S., phasing out above $100,000 (single) or $200,000 (married).
Introducing the “Trump Account” for Children2
This new savings account functions similarly to a traditional IRA but is specifically designed for children:
Eligibility: Only children born between 2025 and 2028 qualify.
Annual Contributions: Up to $5,000 annually.
Government Contribution: $1,000 initial seed money.
Withdrawals: At age 18, the child can withdraw up to 50% for specific purposes like education, homeownership, or starting a business. The remaining balance is fully available at age 30.
Tax Treatment: Contributions are after-tax, so only the account’s earnings (not your original contributions) are taxed at withdrawal, similar to traditional IRAs.
Investment Options: Investments limited to low-cost index funds until age 18.
This account aims to encourage saving from a young age and provide a financial head start in adulthood.
Dependent Care FSA Limit Increased2
The limit for dependent care FSAs rises from $5,000 to $7,500. I can speak from personal experience that my kids day care costs will use up all of that and the increase is welcome.
Charitable Deduction for Non-Itemizers2
Even if you don’t itemize, you can now deduct charitable contributions up to:
$1,000 for single filers
$2,000 for married couples
This simplifies and encourages charitable giving.
EV Subsidies Ending Soon2
Federal electric vehicle subsidies will end after September 2025.
I hope you’ve found this summary helpful. Let me know if you have any questions.
If you’ve only recently joined my email list, you’ve missed out on many insights and updates that I've been sharing each week. Be sure to visit my blog to explore past content that you might find valuable.
Want to receive these weekly? Subscribe here
Enjoy your weekend,
Jeremy Raffer, MBA
Director & Wealth Manager
Author "Financial Planning for Widows"
m. 201-747-2705
w. rafferwealthmanagement.com
e. [email protected]
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652.
1 https://taxfoundation.org/research/all/federal/trump-tax-cuts-2025-budget-reconciliation/
2 https://www.congress.gov/bill/119th-congress/house-bill/1/text
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results
AdTrax 8143581.1 Exp 7/26