Congress Passes and President Signs Into Law “One Big Beautiful Bill”
On July 4, 2025, President Trump signed into law a large tax and spending cut package that Congress passed the day prior.
The almost 900-page legislation, H.R. 1, informally known as the “One Big Beautiful Bill,” extends or makes permanent key provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) that were set to expire in December.
The package does not contain any provisions that significantly and negatively affect retirement plans and products, retiree health savings, or education savings. There are components of the final package that impact savings and benefits programs in direct and indirect ways.
Benefits-related provisions of note include:
New child savings/Trump Accounts and pilot program. The package creates new tax-advantaged child savings accounts, called Trump Accounts, in the form of individual retirement accounts (IRAs) under IRC 408(a) for the exclusive benefit of individuals under age 18.
A separate provision creates a new pilot program, run by the U.S. Treasury, in which the federal government will contribute $1,000 for each U.S. citizen child born after 2024 and before 2029.
Expansion of qualified higher education expenses (529 accounts). The legislation contains the expansion of qualified education expenses to include postsecondary credential programs, additional qualified expenses for elementary and secondary education and increases the maximum amount of annual qualified expenses from $10,000 to $20,000 starting in 2026.
Achieving a Better Life Experience (ABLE) accounts. The package makes permanent the changes made to ABLE programs under the 2017 TCJA law and permanently allows rollovers from 529s to qualified ABLE plans. The new law also extends the SECURE 2.0 Saver’s Credit provision to ABLE contributions permanently.
Health Savings Account (HSA) enhancements. The final legislation allows bronze and catastrophic health plans to qualify for HSA contributions, allowing High Deductible Health Plans to provide telehealth services, and allowing HSA-eligible individuals to participate in direct primary care service arrangements.
Paid family and medical leave (PFML). The package permanently extends the existing tax credit for employers that pay wages for qualifying employees while on PFML. It also modifies the credit so that it can be claimed for a percentage of premiums an employer pays for an insurance policy that provides for PFML for qualifying employees. The employer can elect whether it will claim the credit for wages paid or premiums paid, but it cannot be claimed for both. The bill also makes the credit available in all states.
Employer repayment of student loans and inflation adjustment. The package makes permanent the provision allowing employers to pay employees’ student loans tax-free under a section 127 educational assistance plan, up to $5,250. It also adds an inflation adjustment beginning in 2026.
Federal pensions reforms removed. Of interest, the final package stripped provisions aimed at overhauling the federal government’s pension program, the Federal Employees Retirement System. There are no changes to the program’s structure.
Other key provisions:
Individual rates and other individual tax changes. The existing tax rates and brackets become permanent under the final package. The bill also generally makes permanent the TCJA 2017 changes to the increased standard deduction, alternative minimum tax, and estate and gift tax (with an additional increase to the estate and gift exemption).
Casualty loss deductions. The TCJA’s provision limiting the itemized deduction for personal casualty losses to losses resulting from federally declared disasters is made permanent in the final package and would expand the provision to include certain state-declared disasters.
New deduction for overtime. One of the President’s campaign priorities, the package creates a new above-the-line tax deduction (the “overtime deduction”) of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation that an individual receives during the taxable year for years 2025 to 2028.
New deduction for seniors. The package does not include a no-tax-on-Social Security provision, as the congressional budget reconciliation process used prohibits changes to Social Security. However, it does provide an additional $6,000 for the standard deduction for individuals aged 65 and over for the 2025 to 2028 taxable years. This enhanced deduction is phased out for individuals with income over $75,000 and for couples filing jointly earning $150,000 or more.
State and local tax (SALT) deduction increased, with income limitation: The itemized deduction for SALT is increased to $40,000 annually through 2029 for individual taxpayers with wages under $500,000. After 2029, the cap reverts to the previous $10,000 deduction.
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