How the Senate Republican Tax and Spending Bill Could Impact Your Finances: What You Need to Know

Since 2018, the $10,000 limit on the state and local tax deduction, known as SALT, has been a hot topic for lawmakers, especially in high-tax states like New York, New Jersey, and California. Before this cap, taxpayers could deduct all their state and local taxes without limit. Now, there’s a proposed change: both the House and Senate want to raise this cap to $40,000 starting in 2025, though it would phase out for those making over $500,000.

Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, noted that raising the cap primarily benefits upper-middle-income earners, as lower earners usually don’t itemize deductions.

The child tax credit is another area of focus. It currently gives families a significant tax reduction for each qualifying child. The 2017 tax cuts increased this credit to $2,000. If new proposals pass, it could rise to $2,200 in 2025, with adjustments for inflation starting in 2026. However, this change won’t help approximately 17 million children from low-income families who do not earn enough to get the full credit.

Additionally, some benefits for seniors are being discussed. Proposed legislation suggests a increased deduction for those aged 65 and older, providing more financial support for middle-income taxpayers.

Health coverage is also on the chopping block. Medicaid could see a cut of over $1 trillion in the Senate version and about $800 billion in the House version of the bill. Such cuts could leave around 7.8 million people uninsured by 2034, particularly affecting those who rely on government assistance.

Food assistance programs, like SNAP, are also facing reductions. Proposed changes could affect more than 40 million people, including millions of children and seniors. States may need to fill the funding gaps, which could lead to further cuts or even withdrawal from the program.

As for education, potential changes include stricter limits on federal student loans. Proposed caps could limit borrowing for graduate students and professionals significantly. This may hinder many students who already face high educational costs.

Interestingly, the legislation could introduce new options, like “Trump accounts” for children born between 2024 and 2028, featuring initial deposits to encourage savings. Opinions vary on whether this is a beneficial opportunity or if existing plans provide better support.

These proposed tax and benefit adjustments highlight a broader debate over government assistance, resources available for families, and the overall impact on the economy. As lawmakers continue negotiations, the outcomes will shape how tax policies affect everyday lives.



Source link

United States House of Representatives,US Senate,Congress,Legislation,National budgets,Taxes,Personal finance,Donald J. Trump,Donald Trump,Government taxation and revenue,Tax planning,Personal saving,Breaking News: Investing,Investment strategy,Breaking News: Politics,Politics,Retirement planning,business news