President Trump’s sweeping domestic policy bill that passed the House on Thursday provides a $6,000 boost to senior citizens’ standard deduction from 2025 through 2028.

The new temporary tax break — $6,000 for individuals and $12,000 for couples — is for tax filers age 65 and older. It starts phasing out for those who earn over $75,000 ($150,000 for couples).

“Low-income seniors won’t benefit at all, and nor will very high-income seniors,” Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for fiscal responsibility, told Yahoo Finance.

“The biggest beneficiaries are upper-middle-class seniors with significant wealth, who have a lot of discretion over how much income to realize in a given year,” he said.

To be clear, this provision does not eliminate taxes on Social Security benefits as Trump promised in the campaign. It is a temporary income tax deduction, not a cut in the Social Security tax.

The new deduction could also accelerate Social Security and Medicare insolvency by a year, to 2032, per an analysis from the Committee for a Responsible Federal Budget.

Some background:

Most lower-income seniors don’t have enough of a tax liability to claim the new deduction. In 2022, the median income of older adults was $29,740, according to the National Council on Aging.

The majority of taxpayers claim the standard deduction, which is $15,000 (or $30,000 for couples) for 2025. Seniors who are single filers already qualify for an additional deduction of $2,000. (If you’re married, filing jointly or separately, it’s $1,600 per qualifying individual.)

Read more: Standard deduction vs. itemized: How to decide which tax filing approach is right

This newly passed short-term deduction raises that amount by another $6,000.

Not a Social Security tax cut

Taxation of Social Security benefits is a hot-button issue and often catches seniors at modest income levels by surprise.

Most states do not tax Social Security benefits, but about 40% of people who get Social Security must pay federal income taxes on their benefits, according to the Social Security Administration.

If you file a federal tax return as an individual and your combined income from all sources, including your Social Security benefit, is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If your income exceeds $34,000, up to 85% of your benefits may be taxable.

For joint filers, if you and your spouse have a combined income between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits; if it’s more than $44,000, up to 85% of your benefits may be taxable.

1 Increasing heat on GOP members in districts with big Medicaid populations

Trump has pledged not to cut Medicaid and has falsely claimed that the bill simply targets waste, fraud and abuse in the program. But at least 17 million Americans will lose their health care coverage, according to nonpartisan estimates — the result of the bill’s cuts to Medicaid, the expiration of subsidies for health insurance on the Affordable Care Act marketplaces, and other Republican changes. That could pose a major liability for vulnerable Republicans such as Rep. David G. Valadao, who represents a district in California’s Central Valley with one of the highest numbers of Medicaid recipients in the country, according to an analysis by KFF.

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Valadao and more than a dozen other House Republicans — including Reps. Juan Ciscomani (Arizona), Mariannette Miller-Meeks (Iowa), Michael Lawler (New York) and Young Kim (California), all of whom represent competitive districts — wrote to House and Senate leaders last week expressing concerns about the Medicaid cuts in the Senate version of the bill. But all of them ended up voting for it Thursday. They are already being targeted by the Democratic Congressional Campaign Committee over the program’s cuts, which will not go into effect until 2027.

What are the key items in Trump’s sprawling budget bill?

3 hours ago Share Save Brandon Drenon and Nadine Yousif BBC News, Washington DC Share Save

Watch: First comments from Trump since his megabill passed

US President Donald Trump’s budget mega-bill is set to become law after it passed a final vote in the House of Representatives. The president is now poised to sign the bill into law during a ceremony on Friday. Its advancement has not been easy. The legislation has stoked disputes among lawmakers from Trump’s own Republican Party, who control both chambers of Congress, over social programmes and spending levels. The Congressional Budget Office estimates the bill could add $3.3tn to federal deficits over the next 10 years and leave millions without health coverage – a forecast that the White House disputes. During a vote in the US Senate earlier this week, Vice-President JD Vance was forced to cast the tie-breaking vote in order to pass the bill. The legislation’s prospects in the House appeared precarious, however Republican rebels eventually got on board to support it following hours of wrangling on Thursday. Here is a look at some of the key items and hotly-debated issues in the bill.

Extension of 2017 Trump tax cuts

During his first term, Trump had signed the Tax Cuts and Jobs Act, which lowered taxes for corporations and for individuals across most income brackets. Trump had touted the law as one that would stimulate economic growth, but experts have argued that it has benefited wealthy Americans the most. Key provisions of that law are set to expire in December, but the sprawling budget bill currently before lawmakers aims to make those tax cuts permanent. It also increases standard deductions by $1,000 (£736) for individuals and $2,000 for married couples until 2028.

Steep cuts to Medicaid

To help finance tax cuts elsewhere, Republicans have added additional restrictions to Medicaid, the healthcare programme relied upon by millions of disabled and low-income Americans. One of the changes is a new work requirement for childless adults without disabilities. Another change to Medicaid is shifting re-enrolment from once a year to every six months, and adding income and residency verifications. There are also lower provider taxes – which states use to help fund their share of Medicaid costs – from 6% to 3.5% by 2032. Complaints from some Republicans in states that draw funding from these taxes, especially for rural hospitals, led the Senate to delay the cuts and add a $50bn rural hospital fund. The Senate bill also proposes tightening eligibility requirements so that able-bodied adults with children aged 15 and over would need to work or volunteer at least 80 hours a month. The Senate Medicaid work requirement is said to be the strictest ever proposed by Republicans, raising the odds that large numbers of Americans could lose medical coverage as they will not keep up with the new paperwork. The Congressional Budget Office estimates that nearly 12 million Americans could lose their health coverage by the end of the next decade as a result of these changes.

Social Security taxes

On the campaign trail, Trump vowed to eliminate taxes on Social Security income – monthly payments to Americans of retirement age and people with disabilities. The House bill fell short of delivering on that promise, but it did temporarily increase the standard deduction of up to $4,000 for individuals 65 and over. That deduction would be in place from 2025-28. Senate Republicans approved an extension of Social Security tax breaks and an increase that would grant a $6,000 tax deduction for older Americans who earn no more than $75,000 a year.

Increasing state and local tax deduction (Salt)

The bill increases the deduction limit for state and local taxes (Salt). There is currently a $10,000 cap on how much taxpayers can deduct from the amount they owe in federal taxes. That expires this year. The Senate’s approved bill raises it from $10,000 to $40,000 – but after five years, it would return to $10,000. Salt taxes were a big sticking point in the House, especially Republican holdouts in some Democratic-controlled urban areas. The House’s version of the spending bill did not include a five-year limit, so the Senate’s changes could pose a problem for some House Republicans.

Cuts to food benefits

Reforms have also been added to the Supplemental Nutrition Assistance Program (Snap), which is used by over 40 million low-income Americans. The Senate bill requires states to contribute more to the programme, which is currently fully funded by the federal government. The government would continue to fully fund the benefits for states that have an error payment rate below 6%, but states with higher error rates would be on the hook for anywhere from 5% to 15% of the programme’s costs. The change would start in 2028. The Senate bill also adds work requirements for able-bodied Snap enrollees who do not have dependents.

Boost to defence and border spending

The US military will receive a budget increase of $150bn under the bill. The money will be used to bolster the armed forces’ shipbuilding capacity, as well as to fund Trump’s “Golden Dome” missile defence project. Can Trump build a ‘Golden Dome’ over US? It will also significantly increase funding for immigration enforcement by allocating $100bn to Immigration and Customs Enforcement (ICE), the agency central to the Trump administration’s efforts to crack down on illegal immigration in the US. The additional funding, which will run until 2029, will be used to nearly double migrant detention capacity in the US and hire more enforcement personnel. Prior to the bill, the existing annual budget for ICE was about $8bn. The funding boost now makes ICE the largest federal law enforcement agency, according to the non-profit Brennan Center for Justice.

No tax on overtime or tips and other elements

The “no tax on tips” provision in the budget bill would mark a win for one of Trump’s promises during the campaign. The Senate bill being considered by the House would allow individuals to deduct a certain amount of tip wages and overtime from their taxes. However, they propose gradually phasing out those benefits based on annual income, starting at $150,000 for individuals and $300,000 for joint filers. It would expire in 2028. The Senate legislation would also permanently increase a child tax credit to $2,200 – which is $300 less than what House lawmakers had eyed. The House version required both parents have a Social Security number, but the Senate OK’d a requirement of only one parent. The upper chamber’s bill also proposes raising the debt ceiling by $5tn – more than the $4tn approved by the House last month. The debt ceiling is the limit on the amount of money the US government can borrow to pay its bills. Lifting the debt limit allows the government to pay for programmes already approved by Congress.

Clean energy incentives reduction

One of the most notable divisions between House and Senate Republicans is the Senate’s proposal for clean energy tax breaks. Although both call for an end to the Biden-era federal clean energy tax credits, Senate Republicans approved phasing them out more slowly. For instance, the Senate has extended the runway for businesses that build wind and solar farms to still benefit from the tax credits. However, both the House and Senate version seek to deny the credits to companies whose supply chains may have ties to a “foreign entity of concern”, such as China. Companies that begin construction this year could qualify for the full tax break. That drops to 60% if they begin construction in 2026 and 20% if they begin in 2027. The credit would disappear in 2028. The House version of the bill sought to end the tax breaks for those companies almost immediately.

What happens next?

Donald Trump’s bill will raise top-tier wealth, erode healthcare for poor people and raise the deficit by $3 trillion.

On July 3, the United States House of Representatives passed President Donald Trump’s signature tax cut and spending package, which he has called the “One Big Beautiful Bill“.

The bill combines tax reductions, spending hikes on defence and border security, and cuts to social safety nets.

Democratic Minority Leader Hakeem Jeffries warned that the bill “hurts everyday Americans and rewards billionaires with massive tax breaks”.

Trump’s erstwhile ally, billionaire Elon Musk, publicly opposed the bill, arguing it would bloat expenditure and the country’s already unmatched debt.

Trump is expected to sign the bill into law on Friday, July 4 – the US’s independence day – at 4pm ET.

Here’s what’s next – and whom the bill will affect:

How have taxes been lowered?

The main goal of the bill was to extend Trump’s first-term tax cuts.

In 2017, Trump signed the Tax Cuts and Jobs Act, which lowered taxes and increased the standard deduction for all taxpayers, primarily benefitting higher-income earners.

More than a third of the total cuts went to households with an income of $460,000 or more.

The top 1 percent (roughly 2.4 million people) received average tax cuts of about $61,090 by 2025 – higher than any other income group. By contrast, the middle 60 percent of earners (78 million people) saw cuts in the range of $380 to $1,800.

Those tax breaks were set to expire this year, but the new bill has made them permanent. It also adds some more cuts Trump promised during his latest campaign.

For instance, there is a change to the US tax code called the State and Local Taxes deduction.

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This will let taxpayers deduct certain local taxes (like property taxes) from their federal tax return.

Currently, people can only deduct up to $10,000 of these taxes. The new bill would raise that cap from $10,000 to $40,000 for five years.

Taxpayers will also be allowed to deduct income earned from tips and overtime, until 2028, as well as interest paid on loans for buying cars made in the US from this year until 2028.

Elsewhere, the estate tax exemption will rise to $15m for individuals and $30m for married couples.

In all, the legislation contains about $4.5 trillion in tax cuts.

How big are social welfare cuts?

To help offset the cost of the tax cuts, Republicans plan to scale back Medicaid and food assistance programmes for low-income families.

Their stated goal was to focus these programmes on certain groups – primarily pregnant women, people with disabilities and children – while also reducing what they deem to be waste, including by limiting access to immigrants.

Currently, more than 71 million people depend on Medicaid, the government health insurance program.

According to the Congressional Budget Office (CBO), the bill would leave an additional 17 million Americans without health cover in the next decade.

While Medicaid helps Americans suffering from poor health, the Supplemental Nutrition Assistance Program (SNAP) helps poor people afford groceries.

About 40 million Americans currently receive benefits through SNAP, also known as food stamps.

The CBO calculates that 4.7 million SNAP participants will lose out over the 2025-2034 period, due to program reductions.

Changes to Medicaid and SNAP could become permanent provisions, with no sunset clauses attached to them.

A recent White House memo pointed to more than $1 trillion in welfare cuts from the new bill – the largest spending reductions to the US safety net in modern history.

Will there be new money for national security?

The bill sets aside about $350bn, to be spread out over several years, for Trump’s border and national security plans. This includes:

$46bn for the US-Mexico border wall

$45bn to fund 100,000 beds in migrant detention centres

Billions more to hire an extra 10,000 Immigration and Customs Enforcement (ICE) agents by 2029, as part of Trump’s plan to carry out the largest mass deportation effort in US history.

Will clean energy be affected?

Republicans have rolled back tax incentives that support clean energy projects powered by renewables like solar and wind, instead giving tax breaks to coal and oil companies.

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These “green” tax breaks were a part of former President Joe Biden’s landmark Inflation Reduction Act, which aimed to tackle climate change and reduce healthcare costs.

A tax break for people who buy new or used electric vehicles will expire on September 30 this year, instead of at the end of 2032 under current law.

How will the bill affect the US debt profile?

The legislation would raise the debt ceiling by $5 trillion, from $36.2 trillion currently (which amounts to 122 percent of gross domestic product or GDP), going beyond the $4 trillion outlined in the version passed by the House in May.

Washington cannot borrow more than its stated debt ceiling. But since 1960, Congress has raised, suspended or changed the terms of the debt ceiling 78 times, facilitating more leverage and undermining the US’s long-term fiscal stability.

In his first term, Trump oversaw a roughly $8 trillion increase in the federal debt, which surged due to 2017 tax cuts and emergency spending, approved by Congress, during the COVID-19 pandemic.

Debt as a share of GDP was already higher last year than it was anytime outside of World War II, the aftermath of the 2008 financial crisis or the COVID-19 pandemic. Deficit concerns contributed to Moody’s downgrading of the US credit score in May.

For its part, the White House claims the new tax bill will reduce projected deficits by more than $1.4 trillion over the next decade, in part by spurring additional growth. But economists on both sides of the aisle have strongly disputed that.

Indeed, according to the non-partisan Committee for a Responsible Federal Budget, interest payments on national debt will rise to $2 trillion per year by 2034 owing to the legislation, crowding out spending on other goods and services.

How did the House of Representatives vote on the bill?

The lower house of the US Congress voted by a margin of 218 to 214 in favour of the bill on Thursday.

All 212 Democratic members of the House opposed the bill. They were joined by Representatives Thomas Massie of Kentucky and Brian Fitzpatrick of Pennsylvania, who broke from the Republican majority.

On July 1, the Senate narrowly passed the bill by a 51–50 vote, with the deciding vote cast by Vice President JD Vance.

Who will benefit the most?

According to Yale University’s Budget Lab, wealthier taxpayers are likely to gain more from this bill than lower-income Americans.

They estimate that people in the lowest income bracket will see their incomes drop by 2.5 percent, mainly because of cuts to SNAP and Medicaid, while the highest earners will see their incomes rise by 2.2 percent.

When Hurricane Helene drowned western North Carolina in muck and floodwater last year, it caught folks off-guard.

Now, local leaders in places like Asheville expect the Republican-led reconciliation bill – called the “big, beautiful bill” by Donald Trump – to bear down on rural America. And they wonder whether people are missing the warning signs.

“It’s going to have to hit them first,” said Laurie Stradley, CEO of Impact Health in Asheville, a Medicaid-funded non-profit providing social services to some people still digging out from the flood.

Medicaid is the single largest health insurance program in the US. The public program covers 71 million low-income, disabled and elderly US residents. It pays for half of all US births and the care of six in 10 nursing home residents.

When Trump’s sprawling tax-and-spending bill passed on Thursday, it heralded more than $1tn in federal cuts to Medicaid, which experts worry will push Republican-led states to abandon parts of the program and leave people without access to timely healthcare.

“This is an extraordinarily regressive bill,” said Joan Akler, executive director and co-founder of Georgetown University’s Center for Children and Families. “This is the largest rollback of healthcare coverage that we’ve ever seen and all in service of an agenda to drive tax cuts that will disproportionately benefit wealthy people and corporations.”

Medicaid “expansion” is a key provision of Obamacare, formally called the Affordable Care Act of 2010. The expansion provides largely no-cost health insurance to people earning up to 138% of the federal poverty level, or $36,777 for a family of three. Although Obamacare has been the law for more than a decade, Medicaid expansion proved politically divisive in Republican states, and many only recently decided to accept enormous federal subsidies to cover their residents.

North Carolina will lose $32bn in the next decade

The Medicaid cuts in the bill could have particularly acute consequences in North Carolina, a politically competitive state, where experts said the bill could trigger a “kill switch” to end Medicaid expansion.

“If the state spends any state dollars to implement the expansion population or expansion coverage, it triggers an automatic ending to Medicaid expansion,” said Kody Kinsley, North Carolina’s former secretary of health and an architect of the state’s Medicaid expansion.

North Carolina is set to lose $32bn in federal funding in the next decade, according to an analysis by the office of the Republican senator Thom Tillis, who represents the state. He’s one of just three Senate Republicans who voted against the bill on Tuesday.

North Carolina’s expansion only went into effect in December 2023, and in less than 19 months it enrolled more than 650,000 people – all of whom will lose coverage if the program ends.

Those North Carolinians are only some of the 17 million people expected to lose health insurance by 2034 across the country, according to estimates from the non-partisan Congressional Budget Office. Nearly 12 million people will lose insurance because of attacks on Medicaid.

“Ultimately, Medicaid being cut is going to kill people,” said Molly Zenkler, a nurse at Mission hospital in Asheville. “I deal with people getting their feet literally amputated because they don’t have access to diabetic care. This is just going to get increasingly worse.”

The reconciliation bill cuts state funding through a number of provisions. On healthcare specifically, the bill attacks complex financial maneuvers states use to draw down federal funds. It also requires states to spend enormous sums – perhaps tens of millions of dollars per state – implementing work requirements, effectively adding layers of expensive red tape.

Congressional Republicans in favor of the bill argue it targets “waste, fraud and abuse”. However, it is already well-known that most Medicaid beneficiaries who can work do, and that Medicaid is one of the most cost-efficient health programs in the US, according to the American Hospital Association.

North Carolina is one of a dozen conservative states that wrote a “trigger” law into Medicaid expansion. Not all function like North Carolina’s – the laws are, in the words of an expert with Georgetown University’s McCourt School of Public Policy, a “lesson in federalism” – but they nevertheless underscore the difficult choices state legislators will face because of congressional Republicans’ cuts.

One such program that could be on the chopping block is a pilot with Impact Health, which uses Medicaid expansion funds for social needs that affect health – an effort to reduce long-term costs. Stradley gave the example of a Medicaid-covered child with severe asthma who hit the local emergency room three times a week for breathing treatments.

Impact’s program used Medicaid funds to replace moldy rugs with laminate flooring in the child’s home, and to buy a vacuum with a Hepa filter. The cost to Impact Health was about $5,000, “but now this child is going to the emergency room a couple times a year instead of a couple times a month. And so, every month we’re saving about $4,500.”

The program’s knock-on effects boost the local economy: the work to replace the rug was done by a local carpenter, and the child’s mother isn’t calling out from work, increasing her job stability.

“One of the ways that we talk about this program is that it’s a hand up rather than a handout,” she said. “Almost half of the folks that are recipients in our program are children … Then you look at the adults. Most of them are working multiple jobs, and those jobs don’t come with benefits, because they’re working two or three part-time jobs in order to make ends meet.”

The enormity of Medicaid means large cuts to the program imperil not only patients, but the institutions that serve them – especially rural hospitals and clinics hanging on “by a thread”, according to Kinsley.

One of US residents’ few rights to healthcare is in emergency departments, where hospitals are required to stabilize patients regardless of ability to pay. That makes emergency departments the go-to source for healthcare for the uninsured.

An analysis released by the Sheps Center for Health Services Research at the University of North Carolina at Chapel Hill earlier this year showed that 338 rural hospitals around the country were at risk of imminent closure with the cuts to Medicaid contained in the bill.

‘Hospitals will be forced to restrict services, or close’

Rural states such as Kentucky are expected to be disproportionately hard-hit as well. Thirty-five of the rural hospitals at risk of closure – about 10% – are in Kentucky, even though Kentucky’s 4.5 million residents comprise about 1.3% of the US’s population. About a third of Kentucky residents are on Medicaid, according to figures from Kentucky’s cabinet for health and family services. The program benefits about 478,900 adults.

The situation is similarly dire in Arizona, another battleground state, which also has a trigger law on the books. Although the reconciliation bill may not “trigger” a rollback of Medicaid expansion, it does undermine a key financing mechanism for the state’s program called a “provider tax”.

“We estimate Arizona’s healthcare system would lose over $6bn over the next seven years,” said Holly Ward, a spokesperson for the Arizona Hospital and Healthcare Association, in a statement.

“In other words, more than 55% of Arizona hospitals would be operating in the red,” she said. “Hospitals will be, at best, forced to restrict services such as obstetrics, behavioral healthcare and other complex services, and at worst, will close their doors altogether.”

Another issue is the potential for Republicans’ cuts to drive up the cost of healthcare for Americans who are privately insured, including through employers. As hospitals fight to survive, they will try to extract as much money as possible from other sources of funding – namely, commercial insurance.

In addition, rural healthcare providers worry the water will be muddied by the sheer complexity of US healthcare. Private companies have a hand in managing – and therefore branding – state Medicaid programs.

“A lot of our rural voters may not even realize that what they have is Medicaid, because there are so many names for it,” said Stradley. However, the precarious situation is already worrying people whose lives have been stabilized because of Medicaid.

Amanda Moynihan is a single mother of three children – ages nine, 12 and 16 – living in Kuna, Idaho. Medicaid expansion has helped her become a “functioning human in society”, she said. Routine medical care for herself and her children, along with other assistance programs, has meant the difference between grinding poverty and a shot at the middle class.

Idaho, one of the most politically conservative states in the union, expanded Medicaid in 2018 with an overwhelming ballot-referendum vote of 61-39. Even if Idaho’s “trigger law” does not go into effect, the state could face similar fiscal challenges to Arizona.

“Back two years ago, before I started school, I was just in fight-or-flight, just trying to pay the bills there. I didn’t ever see a future of what I could do. And then I just started with one class,” she said.

Moynihan has completed an associate degree in psychology and is starting the social work bachelor’s degree program at Boise State University in the fall. For now, she’s working part time with the Idaho Commission for the Blind and Visually Impaired and planning to pick up work at a gas station because it has a college scholarship benefit.

But without stability to pursue higher education, her future “would be making the minimum wage, which is about $15 an hour, barely paying rent in a low-income household”.