The wealthy and business-focused Americans have been among the top winners of the tax bill signed by President Donald Trump. Those hit the hardest by the sweeping package include elite universities, which face levies and also immigrants.
The House approved the bill in a 218-214 vote, just one day before Trump’s self-imposed July 4 date.
Here’s who won and who lost in the legislative core to the President’s agenda for domestic policy
Winners:
Multimillionaires
The wealthy gain the capacity to transfer more wealth to their heirs and dodge a tax increase. The bill includes $4.5 trillion in tax cuts, as per a Saturday estimation from the Joint Committee on Taxation.
The estate tax exemption rises to $15 million for individuals, totaling $30 million for married couples, and then adjust with inflation. The 2017 Trump tax cuts for income also remain permanent with the tax benefits tilting towards the wealthy.
Taxpayers in states with high taxes
The maximum amount for the tax on local and state deduction increases to $40,000 per year for a period of five years. The write-off phase out for those who earn more than $500,000 in a year. After five years the limitation is lowered to the $10,000 threshold that was imposed by the tax law in 2017.
Small-scale business owners
The law passed in 2017 that allows pass-through companies to be able to deduct up to 20% of their qualified business earnings from their taxable income will be permanently extended starting in the year 2026 of taxation. The deduction is available to the owners of sole proprietorships, LLCs and partnerships.
Private equity
The tax-free interest deduction that benefits private equity, venture capital and real estate partnership is still in place despite the president’s attempt to cut it off. Private equity also benefited from an extended tax exemption for interest.
Domestic car dealers
Up to $10,000 in interest on loans for the U.S.-made vehicles are tax-deductible until 2028, which is an advantage for auto dealers seeking to close sales. But the break is phased out slowly for individuals earning greater than $100,000 in earnings and couples earning over $200,000 in income.
Manufacturers
The bill restores several beneficial tax laws for companies which include bonus depreciation for production upgrades as well as a research and development tax break, winning the endorsement of the National Association of Manufacturers. The final bill makes these breaks permanent, which were only temporary in the older version which was passed by the House in May.
Fossil fuel producers
Industries such as oil, coal and natural gas get tax breaks as well as new regulations to make more federal land for drilling, while tax breaks for rival green energy technologies are being phased out.
Elderly and tipped workers
As a nod to Trump’s populist promises during his campaign, taxpayers aged 65 and over receive a higher deduction than the standard deduction, and tips and overtime payments are exempt from taxation on income. The rules include limitations that reduce their costs and expire after 2028.
Parents
The maximum child tax credit increases by an additional $200 from $2,000 starting in tax year 2025 and is permanently indexed to inflation. Parents may open up”Trump accounts” for their children that are seeded with a $1,000 government grant for babies born between 2025 until 2028.
Telecommunications
The bill auctions off huge amounts of radio spectrum to be used in wireless broadband. This is an opportunity for companies such as SpaceX’s Starlink and 5G as well as future mobile networks in 6G.
Corporations
Other tax hikes which were thought to be a threat for big business for example, the increase of stock buyback tax or a cap on the local and state deduction for corporations however, were mostly turned down.
Defense contractors
The plan increases defense spending by $150 billion, with a large portion of the money going towards new weapon systems developed by major contractors.
Space
The bill will provide around $10 billion in funding for initiatives, including efforts to reach the Moon as well as Mars and, eventually, remove the space station from orbit.
Losers:
Low-income citizens
The majority of the expenses for the tax bill can be covered by reductions to Medicaid health insurance and food stamps both of which are a boon to those with low incomes Americans. The legislation will cost the bottom 20% of taxpayers around $560 a year, as per a Yale Budget Lab analysis.
The legislation introduces new work requirements for Medicaid beneficiaries, unless they are disabled, elderly or have children who are less than 14 years old. Medicaid recipients who were granted eligibility under the Affordable Care Act will have to cover a portion of the cost through charges such as co-pays.
Food assistance for lower-income Americans is cut by expanding the work requirements of federal food stamps to include beneficiaries up to 65 years old. In 2028, states are also required to cover a percentage of the cost for food benefits which are currently covered fully through the federal government.
Renewable energy
The clean energy industry is hit by this Republican program, which rolls back a number of provisions by former president Joe Biden’s landmark climate law.
Tax credits for wind and solar panels will soon be phased out but the legislation will take time to end other renewable energy sources and investment credits.
Tax credits to help with energy efficiency home improvement and residential installation of solar or other renewable energy improvements are cut at the end of the year.
Technology companies
The Senate squelched a controversial idea to prevent U.S. states from regulating artificial intelligence. The result was victory for the tech industry critics and a blow to the likes of Microsoft Corp. and Meta Platforms Inc. as well as venture capital companies such as Andreessen Horowitz.
Trump administration officials and GOP allies in Silicon Valley had pushed the measure, claiming it would prevent a patchwork of cumbersome state-by-state regulations.
Electric vehicle manufacturers
Tesla Inc., General Motors Co. and a host of other electric vehicle makers are affected by the elimination of a consumer tax credit of up to $7,500 when purchasing electric vehicles.
Elite universities
Add tax bills to the escalating battle the Trump administration is waging against elite universities such as Harvard and Columbia.
The current 1.4% tax rate on the net investment earnings of endowments of private colleges and universities increases for institutions with higher funding. The new tax rate tiered structure could reach 8% for institutions that have the highest endowment earnings per student.
Immigrants
A number of provisions increase taxes on immigrants. The new law includes a 1% tax on the transfer of funds to foreign countries also known as remittances. Many immigrants living in the U.S. send money to relatives in their country of origin.
The proposal also restricts some immigrants’ access to tax credits for health coverage premiums. The change prevents many immigrants granted asylum or temporary protected status from accessing those credits.
Gamblers
Gamblers are permitted to deduct 90% of their losses in comparison to their winnings, which could result in the possibility that they still be taxed when they reach their financial goals in a year, or lose money in the overall.
Closing Thoughts
The recent tax reform highlights the way that legislative changes could dramatically alter the financial landscape providing benefits to high-net worth individuals, companies and certain industries, and posing new challenges for families with low incomes, immigrants, and certain sectors like higher education and renewable energy. This highlights the importance of taking proactive steps and professional guidance to understand the tax issues, reduce possible risks, and pinpoint opportunities that align with long-term financial objectives.
