Trump Tax Bill Would Extend Tax Cuts, Create ‘MAGA’ Accounts

House Republicans are making moves to pass a new tax bill that will bring about significant changes to the tax code. President Donald Trump, who made sweeping changes to the tax code during his first term, is now pushing for another overhaul. The latest version of the tax bill, a 389-page document, offers a glimpse into the potential impact on Americans’ personal finances.

The goal for House Republicans is to pass the bill by July 4, but challenges lie ahead. With a slim majority in the House, consensus-building is crucial, and the bill is expected to undergo several revisions before it reaches its final form. Some of Trump’s priorities, such as eliminating taxes on tips and overtime hours, are included in the bill but may face difficulties if revenue isn’t generated elsewhere.

The bill proposes extending significant income tax cuts, increasing the child tax credit, and temporarily expanding the standard deduction. However, these measures come at a cost. The Joint Committee on Taxation estimates that the bill would add $3.8 trillion to the deficit from 2025 to 2034.

While the bill is still subject to change, there are key tax changes outlined in the latest version. The bill aims to extend provisions from the 2017 Tax Cuts and Jobs Act, preventing tax hikes by removing the sunset date on certain tax rates. These rates range from 10% to 37% and apply to different income brackets.

Additionally, the bill includes provisions to end income tax on tips and overtime. Cash tips would be exempt from federal income taxes through a deduction, benefiting workers in industries like food and beverage, barbering, and spa treatments. Overtime pay would also be exempt from federal tax through a similar deduction, with both provisions set to expire around the end of Trump’s second term.

Overall, the new tax bill promises significant changes to the tax code, with potential benefits for American workers and families. As Congress works towards passing the bill, further adjustments and negotiations are expected to shape the final legislation. The House bill has proposed some significant changes to the tax system, including the elimination of taxes on overtime pay for employees working over 40 hours a week. This plan, however, would exclude highly compensated employees who perform certain duties. Payroll taxes would still apply to overtime and cash tips.

Another major change in the bill is the elimination of the EV tax credit, which has been a popular incentive for electric vehicle shoppers. The tax credit, which offers up to $7,500 to EV buyers, is expected to be phased out by the end of the year. This could impact the sales of electric vehicles in the near future.

On a more surprising note, the bill includes a provision to create “MAGA” accounts for children under 8. These accounts, which stand for “money account[s] for growth and advancement,” would be tax-preferred and funds would be locked until the child turns 18. Parents can contribute up to $5,000 annually, with the government making a one-time contribution of $1,000 for children born between 2025 and 2028.

The bill also seeks to increase the standard deduction for taxpayers who do not itemize their taxes. It would raise the standard deduction by $1,000 for single filers and $1,500 for couples through 2028. There would also be an enhanced deduction of $4,000 for older Americans, subject to income caps.

Additionally, the bill aims to allow a charitable-contribution deduction for non-itemizers, providing an above-the-line deduction of $150 for single filers and $300 for married couples filing jointly. This would incentivize charitable giving among a broader range of taxpayers.

Lastly, the bill proposes to increase the child tax credit by $500 to $2,500 per child from 2025 through 2027. This would provide additional financial support to families with children under 17, with income thresholds determining eligibility for the credit.

Overall, the House bill represents a significant overhaul of the tax system, with changes that could impact various aspects of individual and family finances. It remains to be seen how these proposals will be received and whether they will ultimately be enacted into law.