House HR 1: One Big Beautiful Bill Act’s Tax and Medicaid Changes

The One Big Beautiful Bill Act is a sweeping federal law President Donald Trump signed on July 4, 2025, that makes most of the 2017 Trump tax cuts permanent, adds new tax breaks for tips, overtime, seniors, and car buyers, pays for expanded immigration enforcement and defense, cuts Medicaid and food assistance, rolls back clean energy tax credits, and overhauls federal student loans. Passed as H.R. 1 through the budget reconciliation process and enacted as Public Law 119-21, the law is projected by the Congressional Budget Office to add about $3.4 trillion to federal deficits over 2025 through 2034 before interest, or roughly $4.1 trillion once $718 billion in added interest costs are included.¹

Taxes for Individuals and Families

The biggest piece of the law, worth roughly $3.9 trillion over ten years, is permanent extension of the individual tax provisions from the 2017 Tax Cuts and Jobs Act.² The 10% to 37% income tax brackets are locked in and indexed for inflation, and the higher standard deduction is made permanent. On top of that, single filers get an extra $1,000 and married joint filers an extra $2,000 added to the standard deduction through 2028.³

The maximum child tax credit rises to $2,500 per child through 2028, phasing out at $200,000 of income for single filers and $400,000 for married couples.³⁴⁵

New Temporary Deductions Through 2028

Four new deductions run through 2028:

Qualified cash tips are deductible up to $25,000 per year for workers in traditional tipped occupations. Payroll taxes still apply.³
Qualified overtime pay is deductible up to $12,500, also still subject to payroll taxes.⁶
Blind and elderly taxpayers get an additional $4,000 added to their standard deduction, subject to income phase-outs.³
Interest of up to $10,000 on loans for vehicles assembled in the United States is deductible above the line, subject to income phase-outs.³

SALT Deduction Cap

Starting in 2025, the state and local tax deduction cap rises from $10,000 to $40,000. For taxpayers earning above $500,000, the cap phases down by 30 cents on every additional dollar of income and bottoms out again at $10,000 above $600,000. Both the $40,000 cap and the $500,000 threshold rise 1% a year through 2029, after which the cap reverts to $10,000. The change costs roughly $140 billion over a decade compared to the prior cap, with most of the benefit going to high-income households in states like New York, California, and New Jersey.⁷ Beginning in 2026, the law also limits SALT deductions taken through pass-through entities.⁸

Business Taxes

Full 100% first-year bonus depreciation is made permanent for qualifying business property placed in service on or after January 20, 2025. Domestic research and experimental expenses can again be deducted immediately, while foreign R&D must still be amortized over 15 years.⁹ The qualified business income deduction under Section 199A rises to 23%.³ Business tax cuts add up to about $1.1 trillion over the ten-year window.²

Medicaid and the ACA Marketplace

The law cuts federal Medicaid spending by more than $900 billion between 2025 and 2034.¹⁰ Its central change is a national Medicaid work requirement. Enrollees aged 19 to 64 who got coverage through the ACA’s Medicaid expansion must document 80 hours a month of work, job training, education, or community service. States have to implement the rules by January 1, 2027, though the HHS Secretary can grant extensions through the end of 2028. Exemptions apply to pregnant and postpartum individuals, caregivers of children under 14 or of disabled dependents, medically frail people, and those in substance use treatment, among others.¹¹

CBO estimates that about 4.8 million people will lose Medicaid because of the work requirement alone.¹¹¹²¹³

On the ACA marketplace side, the enhanced premium tax credits are allowed to expire at the start of 2026, reducing federal spending by roughly $335 billion over a decade.¹⁰ Federal Medicaid payments to providers that perform abortions are blocked for one year, a provision aimed at Planned Parenthood that is currently in litigation.¹² Separately, the law creates a $50 billion Rural Health Transformation Program over ten years to bolster health care access in rural areas.

SNAP Food Assistance

The law expands existing work requirements for able-bodied adults without dependents on SNAP to cover people aged 55 to 64. Under these rules, benefits are limited to three months in a three-year period unless the recipient works at least 80 hours a month or qualifies for an exemption. CBO projects the SNAP changes will save $186.7 billion by 2034 and cause about 2.4 million people to lose benefits in a typical month.¹⁴ Federal-state cost-sharing now slides based on each state’s payment error rate, and internet costs no longer count toward the excess shelter expense deduction used to figure benefit amounts.¹⁰

Immigration Enforcement

The law commits $170.7 billion in additional immigration and border funding through September 30, 2029. The largest allocation is $51.6 billion for the border wall, checkpoints, and related infrastructure. Another $45 billion goes to new detention facilities, with potential capacity of 116,000 to 125,000 beds. The law funds 10,000 additional ICE officers ($29.9 billion), 3,000 new Border Patrol agents ($7.8 billion), and a $10 billion State Border Security Reinforcement Fund that provides grants to state and local governments for their own enforcement work.¹⁵

New fees layer onto almost every immigration process. Asylum applicants pay $100 to file plus $100 every year the case remains pending. Every nonimmigrant visa holder pays a $250 visa bond refundable only after full compliance. Noncitizens apprehended between ports of entry face a $5,000 fee, and a second $5,000 penalty applies to anyone arrested after being ordered removed in absentia. Initial work permits for asylum seekers cost $550, and TPS registration is $500.¹⁵ A separate 1% excise tax on remittances sent by cash, money order, or similar physical instruments takes effect January 1, 2026, and is estimated to raise $10 billion over ten years.⁹

Energy and Environment

The law accelerates the sunset of most clean energy tax credits created by the 2022 Inflation Reduction Act. Credits for new and used electric vehicles ended after September 30, 2025. Home energy efficiency credits covering heat pumps, insulation, and rooftop solar ended after December 31, 2025. Clean hydrogen production credits end for projects that begin construction after December 31, 2027, five years earlier than the original IRA schedule. Wind and solar production and investment tax credits end for facilities placed in service after December 31, 2027, though projects that begin construction on or before July 4, 2026, remain eligible.¹⁶

A few credits survive. The 45Z clean fuel production credit runs through 2029 but only for fuels made from U.S., Mexican, or Canadian feedstocks.⁹ The 45Q carbon capture credit is enhanced, with the rate for carbon used in enhanced oil recovery raised from $60 to $85 per metric ton.¹⁷ New Foreign Entity of Concern rules bar entities tied to China, Russia, Iran, and North Korea from receiving several energy tax credits.¹⁶

On the fossil fuel side, the law mandates quarterly onshore oil and gas lease sales across multiple western states, four lease sales in the Arctic National Wildlife Refuge within ten years, and at least 30 offshore lease sales in the Gulf of Mexico over 15 years. Federal royalty rates revert to pre-IRA levels, and noncompetitive leasing is reinstated. More than $5 billion in unobligated IRA money at the Department of Energy, including funding for the Title 17 loan guarantee program, is rescinded, and a new $1 billion Energy Dominance Financing Program replaces parts of the earlier lending infrastructure.¹⁶

Student Loans and Higher Education

Starting July 1, 2026, federal student lending is restructured. The Grad PLUS program is eliminated. Graduate students face new annual borrowing limits of $20,500, or $50,000 for professional programs, with aggregate caps of $100,000 and $200,000.¹⁸ Parent PLUS loans are capped at $20,000 per year per child and $65,000 lifetime per child.¹⁹

Existing income-driven repayment plans sunset. New borrowers choose between the Repayment Assistance Plan, which sets payments at 1% to 10% of earnings with forgiveness after 30 years, and a Tiered Standard Plan with fixed payments over defined periods. Parent PLUS borrowers are limited to the Tiered Standard Plan and lose eligibility for Public Service Loan Forgiveness. New borrowers also lose access to unemployment and economic hardship deferments. Existing borrowers who avoid taking out new loans or consolidating after July 1 keep access to their legacy plans.²⁰

The law adds a Gainful Employment for All standard: almost all higher education programs must show their graduates’ earnings meet a threshold relative to a control group or lose access to federal student loans.¹⁹ A new 100% federal tax credit for donations to scholarship-granting organizations effectively creates a national private school voucher program, with no cap on total contributions but a $1,700 individual annual limit. JCT estimated the credit would cost $25.9 billion over a decade. The endowment excise tax on wealthy private colleges expands into a tiered structure that reaches 8% for institutions holding investment assets of $2 million or more per full-time student.²¹

Defense Spending

The law adds $156.2 billion in mandatory defense funding for FY2025, available for obligation through September 30, 2029, on top of the Pentagon’s regular annual budget.²²²³ Over $7.4 billion goes to military quality of life, including expanded privatized housing construction.

Debt Ceiling

The law raises the statutory federal debt limit by $5 trillion, from $36.1 trillion to $41.1 trillion, meant to push the next debt-ceiling deadline out by roughly one to two years.²⁴²⁵

Who Gains and Who Loses

CBO projects federal debt held by the public will reach 127% of GDP, or roughly $53.7 trillion, by the end of fiscal 2034, compared with 117% under prior law. If ten temporary provisions are later made permanent, that number climbs to about 129%.¹

CBO’s distributional estimates show individuals in the lowest 10% of earners losing about $1,200 per year, and those in the top 10% gaining about $13,600. Health policy analysts project more than 10 million Americans will lose health insurance from the combined Medicaid and ACA changes, and 3 million will lose food assistance.¹⁰ Polls conducted in June 2025 showed unfavorable ratings for the bill ranging from 42% to 64%. Senator Thom Tillis of North Carolina, one of three Republicans to vote against the bill, said it would betray health care promises made to voters, and Senator Ron Johnson called it “immoral.”²⁶

1
American Action Forum. CBO Estimates the Fiscal Impact of the One Big Beautiful Bill
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Committee for a Responsible Federal Budget. What’s in the One Big Beautiful Bill Act
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Every CRS Report. H.R. 1, the One Big Beautiful Bill Act: Tax Provisions
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U.S. Department of the Treasury. Trump Accounts Press Release
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Internal Revenue Service. Trump Accounts
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Center for American Progress. Implementation Timeline of the One Big Beautiful Bill Act
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Bipartisan Policy Center. How Would the 2025 House Tax Bill Change the SALT Deduction
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NYC Comptroller. The SALT Deduction in the House Budget Bill
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Internal Revenue Service. One Big Beautiful Bill Provisions
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Commonwealth Fund. H.R. 1 Funding Cuts and Rural Health Transformation
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Center for Health Care Strategies. Summary of National Medicaid Work Requirements
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Families USA. Medicaid Research
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Center for American Progress. 10 Egregious Things You May Not Know About the One Big Beautiful Bill Act
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CNBC. Medicaid, SNAP Work Requirements and Retirement
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American Immigration Council. Big Beautiful Bill: Immigration and Border Security
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Bipartisan Policy Center. 2025 Reconciliation Debate: One Big Beautiful Bill Act Energy Provisions
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Columbia University Center on Global Energy Policy. Assessing the Energy Impacts of the One Big Beautiful Bill Act
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U.S. Department of Education. Negotiated Rulemaking Session on One Big Beautiful Bill Act Loan Provisions
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National Association of Independent Colleges and Universities. FAQs About the One Big Beautiful Bill Act
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CNBC. Student Loan Big Beautiful Bill Changes
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Tax Notes. Back to School: One Big Beautiful Bill Act
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Congress.gov (CRS). P.L. 119-21 Defense Funding
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Council on Foreign Relations. Will Trump’s Big Beautiful Defense Spending Last
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Brookings Institution. The Hutchins Center Explains the Debt Limit
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Every CRS Report. FY2025 Reconciliation Law Debt Limit
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New Democrat Coalition. What They Are Saying: Trump and Congressional Republicans’ Big Ugly Bill Will Hurt American Families