In Blog 1, we looked at the big-picture themes of the new law. Today, we’re diving into what most people care about most: how much more they’ll keep in their paychecks and what new credits or deductions they might qualify for.
Here are the biggest tax changes affecting working families, retirees, and small businesses.
Income Tax Cuts for Working Americans
The bill makes permanent many of the 2017 Trump tax cuts, including:
- Lower income tax rates across the board
- A larger standard deduction
- Expanded brackets that reduce the impact of “bracket creep”.
If you earn under $100,000, you’ll likely see a noticeable boost in take-home pay. According to early estimates, typical families could see up to $10,900 more per year in their paychecks.
Child Tax Credit: Bigger and Permanent
- The Child Tax Credit is increased (exact amount varies by income and family size)
- It is now permanent, rather than subject to expiration every few years
- Over 40 million families are expected to benefit
This provides more stability for families budgeting around child expenses and planning long-term.
"Trump Accounts" for Newborns
A brand-new feature in the tax code is the "Trump Account" , a new tax-advantaged savings account created by the "One Big Beautiful Bill" for children born between 2025 and 2028.
- $1,000 government-funded account for every American newborn
- Grows tax-free for 18 years, and the funds cannot be withdrawn until the beneficiary reaches 18 years old.
- Can be used for future financial security, education, or retirement. The account is designed to promote long-term saving and financial literacy and will functions like a Roth IRA with no taxes on growth or withdrawal if used for qualified purposes (retirement, possibly education), but under a new, separate account structure.
- Contributions from parents, relatives, or guardians can be made up to $5,000 annually (indexed for inflation starting 2027), invested only in low-cost, broadly diversified U.S. stock index funds or ETFs with very low fees (under 0.1%).
- The account aims to help children start building wealth early through disciplined, long-term investing in the stock market.
- This savings vehicle is different from 529 education plans, as it allows broader saving goals (education, buying a home, starting a business) and requires investment in a simple, low-cost fund rather than offering flexible investment choices/
- In effect, the Trump Account is like a government-seeded, restricted investment account promoting savings for children’s future, with the goal of financial empowerment from birth.
Senior Deduction: Big Tax Breaks for Retirees
- A new $6,000 deduction for taxpayers aged 65+
- Applies to all income, including Social Security
- Phases out starting at $75,000 single / $150,000 joint income
- Fully phased out at $175,000 / $250,000
As a result, nearly 90% of retirees will pay no federal tax on Social Security benefits.
No Taxes on Tips and Overtime (With Limits): To support hourly and tipped workers, the bill introduces new exclusions:
- Tips:
- Up to $25,000 of tip income can be deducted
- Applies to occupations “customarily receiving tips” (per IRS list)
- Income-based phaseout starts at $150k single / $300k joint
- Not available to specified service businesses (e.g., lawyers, consultants)
- Overtime:
- Deduction up to $12,500 per individual, or $25,000 per couple
- Covers “qualified” federally defined overtime pay
- Same income phaseout as tip exclusion shown above
- These provisions reward workers putting in extra hours—particularly in service and trade industries
Auto Loan Interest Deduction
- For qualifying car loans:
- Deduction available for interest on auto loans
- Only for U.S.-assembled vehicles - identified by the VIN #
- Income limits apply (detailed IRS guidance expected in 2025)
- It’s a nod to both domestic manufacturing and everyday Americans financing their cars.
More Money in More Pockets
- This part of the law is clear in its goal: put more cash into the hands of working- and middle-class Americans.
- Bigger paychecks
- Lower tax bills
- New and expanded credits
- Tax relief for retirees and service workers
- Baby savings that grow with the child
Coming Next in the Series.
- In the next blog post, we’ll explore: How the law changes the SALT deduction and taxation of Social Security
If you want help figuring out what these changes mean for you or your family, let’s talk. Click here to schedule a brief phone or zoom chat: https://calendly.com/tarlovfinancial/expedited-meeting-time