Trump Signs OBBB Bill Increasing National Debt by $3.1 Trillion

President Donald Trump signed the so-called One Big Beautiful Bill (OBBB) into law, a comprehensive budget that will have significant implications for millions of Americans' financial situations, both positively and negatively. The legislation encompasses hundreds of provisions that impact individual tax rates, student loans, estate taxes, and more. It aims to fund the included tax breaks by reducing spending on social safety net programs like Medicaid and nutritional benefits, as well as green energy programs. Despite these cuts, it is projected to increase the national debt by $3.1 to $3.5 trillion over the next decade.

The bill also allocates hundreds of billions of dollars for the president's deportation efforts and introduces a dual-class tax structure: one for citizens and their families, and another for those with at least one immigrant member, regardless of their documentation status. Various analyses indicate that the bill will disproportionately benefit wealthy Americans compared to lower-income earners. For instance, after-tax-transfer income for the lowest-earning 20% of Americans is estimated to decrease by $245 next year, rising to a loss of $1,385 annually by 2033. Future generations are also expected to be negatively impacted, with a middle-income child born today projected to experience a $9,800 loss.

The legislation is extensive, with almost 1,000 pages of provisions, many of which still need to be implemented. For example, while it exempts some tips and overtime from federal taxes, the IRS must first write the necessary regulations. Many of the individual tax cut provisions are temporary, lasting generally through 2028. Financial advisors and experts have highlighted key aspects of the OBBB that Americans should be aware of.

Income tax cuts are made permanent, including lower individual tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The bill also eliminates personal and dependent exemptions and some itemized deductions while keeping the doubled standard deduction. For 2025, the standard deduction will be $15,750 for single taxpayers, $31,500 for joint filers, and $23,625 for heads of household. The estate tax exemption is also made permanent, allowing up to $15 million (and $30 million for couples) to be exempt from the federal estate tax, indexed for inflation. This primarily benefits individuals with estates exceeding $7.5 million.

The child tax credit is increased to $2,200 per child, subject to annual inflation increases, and requires the taxpayer, spouse, and child to have Social Security numbers. Seniors aged 65 or older will receive a temporary "bonus" deduction of up to $6,000 on their income taxes for tax years 2025 to 2028. Car buyers can deduct up to $10,000 of interest per year on new auto loans, limited by income and applicable only to cars assembled in the United States. Tip and overtime tax deductions are provided, with important restrictions and phase-outs based on income.

The bill makes several changes to the federal student loan program starting in 2026, which may result in higher payments for borrowers. It reduces the number of income-based repayment plans and introduces the Repayment Assistance Plan (RAP), which has a minimum monthly payment. The bill also lowers the limits on graduate school loans, eliminates the federal Grad PLUS program, and caps Parent PLUS borrowing. These changes apply to new loans starting July 1, 2026, and may force borrowers to rely on private loans or forgo higher education.

The state and local tax (SALT) deduction cap is increased to $40,000, benefiting taxpayers in regions with high state and local taxes, such as California, Illinois, New Jersey, and New York. This provision is temporary and will revert to $10,000 in 2030. The bill also establishes "Trump accounts," a new type of tax-favored account for newborns, providing $1,000 for children born between 2025 and 2028.

Medicaid cuts are significant, with strict new work requirements for able-bodied adults and increased eligibility checks. Estimates suggest that around 16 million Americans may lose health coverage. Americans with Affordable Care Act (ACA) health insurance coverage will face additional hurdles in renewing their eligibility for tax credits, and the bill does not extend ACA subsidies, potentially leading to increased health insurance costs and reduced access for many.