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President Donald Trump’s landmark spending bill is ready to sign the law after Republicans in both houses of Congress remove the necessary votes ahead of the GOP’s self-imposed deadline to send laws to the president’s desk.
The bill will permanently extend the tax cuts introduced in the 2017 Tax Cuts and Employment Act, and introduce numerous new breaks. Some of the tax deductions, such as the expanded child tax credits and the deductions for charitable contributions, are permanent changes to the tax law.
Others are expected to expire in 2028 at the end of Trump’s term.
That doesn’t mean they will necessarily do that. After all, cuts from the TCJA were scheduled for sunset this year. This is the reality that “all lawmakers and those across the aisle” wanted to avoid entering budget negotiations.
Still, for now, four provisions, including those Trump has campaigned, are not going to stick for a long time.
1. There is no tax on tips
The bill creates a higher deduction for hints acquired by workers in occupations that traditionally receive hints. This means, for example, a bartender can deduct the total amount of hints from taxable income in a given year.
The deduction is a gradual stage for individuals making more than $150,000 a year, or $300,000 a year for joint filers. Taxpayers can deduct up to $25,000.
The exemption applies only to federal income taxes. Sloping workers are subject to state and local income and payroll tax.
2. There is no tax on overtime
From 2025 to 2028, workers can deduct overtime payments from federal income tax.
The deduction is jointly filed at $12,500 for single filers and $25,000 for married couples. This break will begin phase-out of a single filer that earns more than $150,000 ($300,000 for joint filers), and will not be available to anyone making more than $275,000 or $550,000 as a couple.
3. There is no tax on car loan interest
The bill will allow for a deduction of up to $10,000 on new car loans. To qualify, you must have received a loan from December 31, 2024 for a US assembled car, minivan, van, sports utility vehicle, pickup truck or motorcycle for personal use.
The deduction begins to lose the value of the $200,000 worth of filers or co-filer whose income is over $100,000.
According to the AAA, the average driver paid a $1,332 loan interest fee for a new car purchased in 2024. According to Cox Automotive data, to qualify for the $10,000 deduction, you will need to take out a loan of about $112,000.
4. Trump Account
The bill will create a new type of savings account for children with one-off deposits from the federal government for US citizens born between 2025 and 2028.
Parents can make annual after-tax contributions of up to $5,000 to these funds to invest in a variety of funds that track US stock indexes.
If you are one of these children, you cannot withdraw money until you are 18 years old, and you can only withdraw half of your money between the ages of 18 and 25. When you turn 31, you will receive the remaining funds in your account as a distribution.
Money spent on qualification costs, including higher education and first-time home purchases, is taxed at long-term capital gains rates. Other profits are treated as income, and there is a 10% tax penalty for beneficiaries under the age of 30.
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