A sweeping new tax bill called the Big Beautiful Bill (BBB) has just been passed by Congress, ushering in significant changes that will impact millions of Americans. From changes to the state and local tax (SALT) deduction cap to extensions of the 2017 Trump tax cuts, and even controversial cuts to Medicaid, this legislation marks one of the most consequential tax policy shifts in years.

Here’s what you need to know about the major provisions of this new tax stimulus bill.

1. Higher SALT Deduction Cap

One of the headline features of the new law is the increase in the cap on the state and local tax (SALT) deduction. Previously limited to $10,000, now $40,000, the SALT deduction cap has now been raised substantially, offering relief for taxpayers in high-tax states like New York, California, and New Jersey.

Key points:

• New SALT cap raised to $50,000 for married couples filing jointly

• Aimed at reducing tax burdens for middle- and upper-middle-income households

• Expected to have significant impact in high-cost-of-living regions

This change reverses part of the limitation put in place under the 2017 Tax Cuts and Jobs Act and could mean larger deductions for many taxpayers on their federal returns.

2. Extension of 2017 Trump Tax Cuts

The bill extends several provisions from the 2017 Trump tax cuts, which were set to expire in coming years. These include:

• Lower individual income tax rates across multiple brackets

• Higher standard deduction amounts

• Expanded eligibility for certain deductions and credits

This extension provides continued tax relief for both individuals and small businesses and preserves the lower tax rates introduced nearly a decade ago.

3. Steep Medicaid Cuts Spark Controversy

One of the most controversial aspects of the new tax bill is its significant cuts to Medicaid funding. Lawmakers argue the cuts are necessary to offset revenue losses from tax breaks, but critics warn of potential impacts on vulnerable populations.

• Bill reduces federal Medicaid contributions over the next decade

• States may face tough choices about coverage and eligibility

• Healthcare advocates are raising concerns about reduced access to care

Expect fierce debate over the long-term consequences of these changes, particularly for low-income families and individuals with disabilities.

4. Changes to Social Security Taxes

The new legislation introduces tweaks to Social Security payroll taxes, intended to shore up the system’s finances:

• Increased income cap on wages subject to Social Security taxes

• Higher taxes on higher-income earners

• Projected to extend Social Security solvency by several years

While this change impacts higher earners most directly, it’s part of a broader push to stabilize Social Security funding.

5. Overtime and Tips Now Tax-Free

A popular element of the bill is the removal of federal income tax on overtime pay and tips for most workers. This is designed to boost take-home pay and encourage additional work hours.

• Federal income tax eliminated on overtime earnings and tip income up to specific annual limits

• Aimed at helping hourly and service industry workers

• Businesses anticipate potential challenges in payroll administration

For millions of workers in industries like hospitality, food service, and retail, this could mean meaningful extra cash in their pockets each pay period.

6. Expanded Child Tax Credit

Finally, the new bill enhances the Child Tax Credit (CTC):

• Credit increased from $2,000 to $2,500 per child

• Fully refundable for low-income families

• Available for children under age 18

This expansion continues efforts to reduce child poverty and ease financial strain on families amid rising living costs.

What’s Next?

Many taxpayers will welcome the immediate tax relief and higher deductions, the bill’s fiscal impacts—including the Medicaid cuts—are already sparking intense debate. Economists will be watching closely to see how these changes influence the broader economy, inflation, and the federal deficit.

Stay tuned for further details as the IRS releases guidance on how these new rules will be implemented in upcoming tax years.

Tags: tax stimulus bill, SALT deduction, Trump tax cuts, Medicaid cuts, Social Security taxes, tax-free overtime, child tax credit, personal finance, tax news