Tax season may be over, but your tax breaks and certain federal benefits for next year are still uncertain.
Republicans in the U.S. House of Representatives recently adopted the U.S. Senate’s amended budget resolution for President Donald Trump’s ‘one, big beautiful’ tax policy package.
The blueprint mandates $4 trillion in spending cuts, while offsetting at least $1.5 trillion of the federal budget through cuts to federal programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP) over a decade.
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The projected federal cuts could impact as many as 41 million U.S. households that received SNAP benefits last year. In November, over 79 million people were enrolled in Medicaid and the Children’s Health Insurance Program (CHIP) in the 50 states and the District of Columbia.
Despite opposition and concerns from several government officials and policy analysts, GOP lawmakers on both sides of the aisle are figuring out what will be included in Trump’s tax mega-bill, and what safety net programs and popular tax breaks will be on the chopping block to make it happen.
Here’s what you need to know about Trump’s highly anticipated bill.
What’s included in Trump's tax cuts?
When Trump stepped into office for his second term, it was clear that his administration would have to tackle tax policy immediately. That’s because about seven years ago, Trump signed the Tax Cuts and Jobs Act (TCJA) into law, which became the biggest tax overhaul since the Reagan era. But many of the TCJA’s key provisions are set to expire at the end of 2025.
As reported by Kiplinger, the TCJA impacted millions of taxpayers across the U.S. as it nearly doubled the standard deduction, repealed personal and dependent exemptions, and increased the Child Tax Credit (CTC). It also created a $500 tax credit for dependents.
The TCJA also doubled the estate tax exemption, cut the maximum income tax rate to 21%, and more. Many of those provisions are set to expire by the end of this year, so the Republican-led Congress needs to act fast.
What does Trump want to include in his ‘beautiful’ tax policy bill?
- First, the Trump administration is calling for a permanent extension of the TCJA, and adding polices such as no taxes on tips, overtime pay, and Social Security benefits for retirees.
- Trump also proposed a deduction for auto loan interest for American-made cars.
- The bill may include changes to the cap on state and local tax (SALT) deductions.
Aside from major tax cuts, which some analysts argue benefit the wealthy, the legislative package also aims to impose policy changes on border security and energy. One proposal includes eliminating the $7,500 federal tax credit for EV purchases.
For recent updates, read Trump’s ‘One Big, Beautiful Bill’ With Trillions in Tax Cuts
SNAP and Medicaid programs face massive cuts
Shoppers browse items on display for sale at an Aldi Stores Ltd. food market in Chicago, Illinois. Over 41 million households were SNAP recipients in 2024.
The budget plan that House Republicans adopted to extend Trump’s 2017 tax cuts calls for slashing at least $1.5 trillion in federal spending over the next decade. Now, GOP lawmakers are deciding what’s on the chopping block.
The House budget resolution targets two major programs, which reportedly include:
- Medicaid cuts: Federal cuts of up to $880 billion (or $88 billion per year) in Medicaid over the next decade. Medicaid is a joint federal and state program that provides comprehensive health coverage for children and adults with limited income.
- States pay for SNAP: Federal cuts of at least $230 billion from Agriculture Committee programs through 2034 by making states pay for a portion of SNAP. SNAP, formerly known as food stamps, is a federal anti-hunger program that provides monthly funds to help low-income households purchase nutritious food.
Over 71 million individuals were enrolled in Medicaid as of November 2024, according to the latest government data. Those benefits could be reduced under the GOP blueprint for Trump's proposed tax cuts.
According to the Center for Budget and Policy Priorities (CBPP), it’s “unrealistic” to assume that most or all states could match the missing portion of federal funds. In fiscal year 2024, tax revenue fell in 40 states after being adjusted for inflation, with many states reportedly projecting looming budget deficits.
As an example, if Pennsylvania had to cover at least 10% of SNAP benefits last year, it would have had to pay nearly $427 million for families to not lose their food benefits. That’s about 1.5 times what the state spends on its entire community college system, the CBPP found.
“Let’s be clear: in this budget framework, there is no way to cut $1.5 trillion in spending while protecting health coverage through Medicaid and food assistance through SNAP,” said Sharon Parrott, CBPP President, regarding House passage of the congressional budget resolution.
According to Parrott, Congress should reduce Trump’s tax cuts and pay for them with “responsible, targeted revenue” and require corporations and the wealthy to pay their fair share.
At the same time, Congresswoman Alma S. Adams (ND-12) characterized the GOP budget blueprint as “disastrous.”
“This budget is reckless and harmful, and anyone who voted for it has abandoned our working- and middle-class families,” said Adams, citing concerns on how the plans would decimate Medicaid and SNAP federal funding.
Congresswoman Alma S. Adams
Can tariffs fund Trump’s tax cuts?
President Trump has suggested that tariffs would cover the cost of the bill. However, economists say that Trump’s tax cuts are projected to cost more than tariff revenue can generate.
According to the Penn Wharton Budget Model, enacting Trump's major tax cuts would cost $7.7 trillion, including eliminating taxes on Social Security benefits, income tax on tips, and overtime pay.
- The Yale Budget Lab estimates that Trump’s tariffs as of April 15 raise up to $2.4 trillion over the next decade, with $631 billion in negative dynamic revenue effects.
- The Tax Foundation projected that some of Trump’s universal tariffs alone would raise $3.4 trillion.
That doesn’t count potential economic downturns, which forecasters say could be unraveled by the Trump administration’s recent tariff announcements and escalating trade war.
A poll of more than 300 of the United States' top executives found that over 60% expect a recession or economic downturn within the next 6 months due to tariffs. That’s up from 48% who said the same in March.
“This budget architecture was terrible a couple of months ago,” added Parrott. “It is a far worse plan at a moment when the President’s tariffs, chaotically crafted and applied, have caused business uncertainty to soar and raised the risk of a recession, higher unemployment, and surging prices.”
What’s next
As reported by Kiplinger, tariffs on imported goods are regressive taxes that raise prices for U.S. businesses and consumers. It’s clear that tariffs on their own won’t be enough to fund Trump’s planned tax cuts.
Looking forward, Republican lawmakers will have to weigh which popular tax breaks and deductions could be eliminated or reduced to make their budget work. Federal spending cuts worth trillions of dollars could also impact social programs like Medicaid and SNAP, putting at risk millions of households that depend on those benefits for healthcare and food security.
Stay tuned to Kiplinger as we report on how Trump’s tax policy agenda could impact you.
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