President Donald Trump pledged his signature sweeping tax law would transform the economy.
A year later, experts are still parsing the longer-term effects of Trump’s One Big Beautiful Bill Act on the broader economy, but many of the law’s provisions have started hitting Americans’ wallets.
Tax refunds were higher on average this year, creating a short-term stimulus effect for many Americans and businesses, and helping to offset price increases in gas and groceries triggered by the war in Iran. That’s helped Americans.
But large cuts to social services, which will hurt low-income Americans, are only beginning to take effect. Nonpartisan analyses of the bill found the law’s relief would be uneven, with long-term tax cuts benefiting higher and middle-income earners more than lower-income populations.
Early benefits are creating a kind of “sugar high,” said John Ricco, associate director of policy analysis at Yale’s Budget Lab.
“You sort of create benefits in the short term and kick the can down the road in terms of paying for it fiscally or macro-economically‚” he said.
The tax cuts will also lead to higher federal budget deficits. The nonpartisan Congressional Budget Office estimated that the law will increase deficits by $4.2 trillion over the next 10 years.
The law was expected to spur stronger economic growth in 2026, according to the CBO, but that estimate didn’t account for the war with Iran, which spiked inflation. Now, economic growth is expected to be much lower for the year.
The law “is simultaneously delivering short-term economic relief while laying the groundwork for long-term economic growth,” White House spokesman Kush Desai said in a statement. “Tens of millions of working-class Americans have more money in their pockets thanks to President Trump’s signature provisions” in the law, he added.
Here’s what the tax bill has done so far.
Extended 2017 tax cuts
The law preserved a slate of income tax cuts enacted in 2017 during Trump’s first administration. Those tax cuts, set to expire after 2025, lowered tax responsibility for almost every income group, even as they disproportionately benefit higher-income earners.
The average refund amount for 2025 was $3,275, an increase of more than 11 percent over last year, driven by both the tax cuts and overpayment in 2025. The higher-than-normal refunds probably increased Americans’ spending this spring .
Bigger standard deduction
The 2017 tax law doubled the standard deduction, which most taxpayers use to reduce their taxes.
The 2025 law extended the higher standard deduction, which is tied to inflation, and slightly increased the amounts taxpayers can claim to $15,750 for singles and $31,500 for couples.
This provision has been especially popular among taxpayers, with 90 percent of tax filers claiming the standard deduction, the Treasury Department said.
Tax breaks for tips, overtime, seniors
The administration has touted new provisions in the law, known as “no tax on tips” and “no tax on overtime,” as particularly helpful for lower-income families.
The provisions do not get rid of all taxes on tips and overtime but let taxpayers deduct certain tip and overtime income, up to a specific amount. The breaks expire at the end of 2028 and are “pretty targeted,” said Elena Patel, co-director of the Urban-Brookings Tax Policy Center.
The tax break for tips is limited to the first $25,000 of tipped income. The overtime tax break is limited to $12,500, and applies to the difference between a worker’s regular wage and their overtime wage. Both provisions phase out at higher incomes.
The IRS has not yet released detailed filing statistics for this tax year, but last month it released some early data for many of the tax relief provisions. The provisions have been popular; more than 7.5 million people claimed the tip carve-out with an average deduction of $7,000, according to the Treasury Department. More than 29 million people claimed the overtime deduction.
The law also created a new $6,000 standard deduction for people over 65 that expires at the end of 2028 and phases out at the higher incomes, a substitute for Trump’s campaign promise to eliminate income taxes on Social Security. More than 35 million people claimed the deduction.
Increased child tax credit
The child tax credit was scheduled to fall from $2,000 per child to $1,000 per child with the expiration of the 2017 tax law.
The new law permanently extended the boosted child tax credit and increased it to $2,200, pegging it to inflation. The law also began requiring that a taxpayer have a Social Security number to get the benefit, which means noncitizens cannot benefit. Nearly 40 million families claimed the credit, Treasury said.
Households with lower incomes see a smaller benefit from the credit, according to the Bipartisan Policy Center. But if parents don’t owe taxes or if they owe less than the tax credit, they don’t get the full tax break.
Investment accounts for kids
The tax bill created investment accounts for kids called “Trump accounts,” which will start being seeded with $1,000 from the federal government Saturday. Any adult can contribute up to $5,000 to an account annually. More than 6 million accounts have been opened, according to Treasury.
To qualify for the $1,000 federal contribution, kids must be born between Jan. 1, 2025, and Dec. 31, 2028, and be U.S. citizens with valid Social Security numbers. So far, 1.4 million are eligible for the $1,000 contribution, Treasury stated.
Some 86 percent of Trump accounts are linked to families earning less than $200,000 annually, officials said Thursday.
Business tax breaks
The law extended or revived several tax breaks for businesses designed to promote investment in capital expenditures and research. Several companies quickly reported that they expected lower tax liabilities, sometimes by billion of dollars, due to the law. The provisions let companies deduct the full amount of investments at once, instead of spreading it out over many years.
The law also allowed businesses to deduct the cost of some investments they already made before the law passed, which drove a “surge in corporate refunds,” said Kent Smetters, faculty director of the Penn Wharton Budget Model at the University of Pennsylvania. He estimated that the provisions cost the government $69 billion in 2025 and will cost more in the next several years. He added that the changes in the law are making it easier for AI companies to continue building rapidly — one of the factors contributing to record stock market performance this year. The S&P 500 is up 9 percent since the beginning year, and the tech-heavy Nasdaq is up 11 percent during the same period.
But full effects of the increased investment won’t be seen for a long time. Businesses may be making use of the changes to buy new machinery or factories, which can take years before it leads to jobs.
“This is not a flip-of-a-switch effect here,” said Erika York, vice president of federal tax policy at the Tax Foundation. “This is a slow and steady effect that will take years to come to fruition.”
Medicaid cuts
Republicans made big changes to Medicaid in an effort to partially offset the overall price tag of the tax cuts. It’s the single largest way lawmakers paid for the legislation, cutting an estimated $1 trillion from the federal program that provides health insurance for low-income people.
The law created new requirements that make it tougher for people to get Medicaid. Most people under 65 must work or do community service for at least 80 hours per month or go to school part-time to qualify. Parents of young children and some other groups are exempt from the new requirements.
The law “contained the largest rollback in federal support for health coverage ever,” said Elizabeth Williams, a senior policy manager for KFF’s program on Medicaid and the uninsured.
But the provisions with the biggest impact don’t go into effect until after the midterm elections, with work requirements starting in January 2027.
The work requirements alone are expected to result in 5.3 million more uninsured people by 2034, according to an August 2025 estimate from the Congressional Budget Office. All of the law’s health provisions are expected to push 10 million people off insurance by 2034, according to the CBO.
SNAP cuts
The tax cut law toughened up work requirements for the Supplemental Nutrition Assistance Program, formerly known as food stamps, which helps low-income people buy groceries. The changes reduce federal spending for SNAP by $211 billion through 2035, according to a CBO report in February, and were another way Republicans paid for the tax cuts.
Some of these cuts have begun to take hold in parts of the country.
The new rules require more people to work 20 hours a week to access food stamps, including older people and parents with kids who are 14 years old or older. It also limits eligibility to citizens.
The law requires states to match federal funds for SNAP, which some experts warn could force states to reduce enrollment or eliminate their programs.
The work requirements are expected to reduce SNAP participation by 2.4 million people in an average month over the next 10 years, according to a CBO estimate from August. The matching-funds requirements probably will lead to the reduction or elimination of SNAP benefits for around 300,000 people in an average month, the CBO estimated. The prohibition on noncitizens using SNAP is expected to push around 90,000 people off the benefit in an average month.
Luis Melgar contributed to this report.
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