One Big Beautiful Bill Act facts for kids
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| Long title | To provide for reconciliation pursuant to title II of H. Con. Res. 14. |
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| Acronyms (colloquial) | OBBBA, BBB, OBBB |
| Enacted by | the 119th United States Congress |
| Codification | |
| Acts amended | Tax Cuts and Jobs Act |
| Legislative history | |
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The One Big Beautiful Bill Act (also known as OBBBA or Big Beautiful Bill) is a major U.S. federal law. It was passed by the 119th United States Congress and signed into law by President Donald Trump on July 4, 2025. This law includes many new rules about taxes and government spending. It is a big part of President Trump's plans for his second term.
Even though it's called the "One Big Beautiful Bill Act," this official short name was removed during the Senate's changes. So, the law doesn't officially have a short title.
The OBBBA has hundreds of different parts. It makes the individual tax rates from 2017 permanent. These rates were going to end in 2025. The law also changes the limit on how much people can deduct for state and local taxes. It adds new temporary tax breaks for tips, overtime pay, and car loans. It also creates "Trump Accounts" for parents to save money for their children's future education or home down payments.
Other parts of the bill include a permanent increase in the child tax credit. It also adds a small tax on money sent out of the country. The law increases taxes on money earned from college savings (endowments). It also reduces some tax credits for clean energy that were part of the Biden-era Inflation Reduction Act. Instead, it supports fossil fuels more than renewable energy.
The bill increases a tax credit for making advanced computer chips. It also removes a tax on gun silencers. The law raises the debt ceiling by $5 trillion. This is the total amount of money the U.S. government can borrow. It also makes a big 12% cut to Medicaid spending. Medicaid is a program that helps people with low incomes get health care.
The OBBBA also makes it harder to get SNAP benefits (food assistance) by adding more work requirements. It makes states pay for some of the costs of this food program. The law adds $150 billion for defense spending. It also adds another $150 billion for border security and deportations. It greatly increases funding for Immigration and Customs Enforcement (ICE). By 2029, ICE will get over $100 billion. This makes it the most funded law enforcement agency in the U.S. government.
The Congressional Budget Office (CBO) is a group that estimates how laws will affect the budget. They believe this bill will increase the national debt by $2.8 trillion by 2034. They also think it will cause 10.9 million Americans to lose their health insurance. Many experts and people who oppose the bill have criticized it. They say its tax system is unfair and that it will move wealth from poorer people to richer people. The bill has also caused arguments because it reduces clean energy support and increases money for immigration enforcement. Many polls show that most Americans do not support this bill.
Contents
- How the Bill Came About
- What the Bill Includes
- Extending 2017 Tax Cuts
- State and Local Tax (SALT) Cap
- Tax Breaks for Tips and Overtime
- Car Loan Interest Deduction
- Tax Credit for Seniors
- Child Tax Credit Changes
- College Endowment Taxes
- "Trump Accounts" for Children
- Phasing Out Green Energy Tax Credits
- Raising the Debt Ceiling
- Military Defense Spending
- Border Security and ICE Funding
- Medicaid Cuts
- SNAP (Food Assistance) Changes
- Student Loan Changes
- Other Provisions
- How the Bill Was Passed
- Parts That Were Removed
- What the Bill Does
- Common Misunderstandings
- See also
How the Bill Came About
After the 2024 United States elections, the Republican Party gained control of both the House of Representatives and the Senate. Republicans then started working on President-elect Donald Trump's plans for the country.
In December 2024, Senate leader John Thune suggested passing laws on border security, energy, and the military first. He thought they could deal with tax policy later. But Trump wanted one big law to fix everything, especially the tax cuts from 2017 that were about to end.
In January 2025, House Speaker Mike Johnson said that Trump wanted "one big, beautiful bill" to put all his ideas into action. To make it easier to pass, Republicans decided to use a special process called budget reconciliation. This process allows certain bills to pass the Senate with a simple majority vote (51 votes). This was important because Republicans had 53 out of 100 seats in the Senate. Normally, most bills need 60 votes to pass in the Senate.
The Senate approved the bill 51–50 on July 1, 2025. Vice President JD Vance cast the tie-breaking vote to support it. The House of Representatives passed it 218–214 on July 3, 2025. In both houses, all Democratic members voted against the bill.
What the Bill Includes
The OBBBA has many parts. It is expected to add about $3 trillion to the national debt. It is also projected to cut about $4.46 trillion in tax money over 10 years.
Extending 2017 Tax Cuts
The bill makes the individual tax rates that President Trump signed into law in 2017 permanent. These tax rates were originally set to end at the end of 2025.
State and Local Tax (SALT) Cap
The law raises the limit on the state and local tax deduction to $40,000 for people earning less than $500,000. This cap will go back to $10,000 after five years. This change is estimated to cost $142 billion.
Tax Breaks for Tips and Overtime
The bill creates new tax deductions for tips and overtime pay. These are for workers who earn less than $150,000. Each deduction is limited to $25,000. These new tax breaks will end in 2028.
Car Loan Interest Deduction
People who buy cars made in the United States between 2025 and 2028 can deduct up to $10,000 per year in car loan interest. This deduction slowly disappears for individuals earning over $100,000 or couples earning over $200,000.
Tax Credit for Seniors
The bill permanently removes the personal exemption, which was temporarily gone since 2017. It also offers a temporary tax deduction of up to $6,000 for seniors. This deduction will end in 2028.
Child Tax Credit Changes
The law increases the maximum child tax credit from $2,000 to $2,200 per child. This amount will also be adjusted for inflation.
College Endowment Taxes
The bill increases taxes on money earned from college endowments. Endowments are large funds of money that colleges use for various purposes. This change is expected to bring in $761 million over 10 years.
"Trump Accounts" for Children
The bill creates "Trump Accounts." For children born between 2025 and 2028, the U.S. government will deposit $1,000 when they are born. Parents can then add up to $5,000 per year. The money in these accounts grows without being taxed right away. It can be used for higher education, job training, or a down payment on a home.
Phasing Out Green Energy Tax Credits
The bill starts to remove green energy tax credits that were passed in the Biden-era Inflation Reduction Act. For example, tax credits for electric vehicles will be phased out by September 2025.
Raising the Debt Ceiling
The law raises the United States debt ceiling by $5 trillion. This allows the government to borrow more money to pay its bills.
Military Defense Spending
The bill adds an extra $150 billion for military defense spending. This money goes to things like shipbuilding, a new missile defense system called "Golden Dome," and artificial intelligence for military use. It also includes money for improving military operations in the Indo-Pacific region.
Border Security and ICE Funding
The bill includes $170 billion for border security. This money is meant to help deport up to one million people each year. It greatly increases funding for ICE. This makes ICE the most funded law enforcement agency in the federal government. The funds include money to build more of the wall on the U.S.–Mexico border. It also pays for 100,000 new migrant detention beds and hiring 10,000 new ICE agents.
Medicaid Cuts
The bill cuts over $1.2 trillion in federal spending. Most of these cuts come from Medicaid and SNAP (food assistance). For the first time, the bill adds work requirements for Medicaid recipients. People aged 19 to 64 must work at least 80 hours per month to qualify.
SNAP (Food Assistance) Changes
The bill requires SNAP beneficiaries aged 18–64 to work at least 80 hours per month. It also requires states with high error rates to pay for some of the SNAP benefit costs.
Student Loan Changes
The bill pauses a rule from the Biden administration that would cancel some student loans. It also puts limits on how much graduate students can borrow each year and in their lifetime.
Other Provisions
The bill also includes:
- A new 2.5% tax credit for metallurgical coal.
- $12 billion for air traffic control.
- A 1% tax on remittances (money sent out of the country).
- $10 billion for NASA projects, including money for the Lunar Gateway space station and Space Launch System rockets.
- It requires the Bureau of Land Management to hold regular sales for oil and gas drilling rights.
- It reduces funding for the Consumer Financial Protection Bureau.
- It removes the $200 tax on making or transferring gun suppressors and short-barreled rifles.
How the Bill Was Passed
The process of passing this bill was long and involved many steps.
Budget Discussions
First, the Senate and House had to agree on a budget plan. This plan would set the rules for the big bill. There were disagreements between different groups of Republicans about how much to cut spending. Eventually, both the House and Senate passed similar budget plans. These plans allowed for tax cuts and raising the debt limit.
First House Vote
After different House committees worked on their parts of the bill, the House Budget Committee put them all together. Some Republicans wanted more spending cuts and voted against it at first. But after some changes, the committee voted to move the bill forward.
On May 22, the United States House of Representatives passed the OBBBA by a very close vote of 215–214–1. Most votes were along party lines. Almost all Democrats voted against it.
Democratic Response
The very close vote caused some arguments within the Democratic Party. Three older Democratic representatives had passed away earlier in 2025. If they had been alive, the vote might have turned out differently. This led to discussions about older politicians staying in power.
Senate Vote
After the House passed the bill, it went to the Senate. Republican Senators had different ideas about the bill. Some wanted deeper spending cuts, while others worried about cuts to Medicaid or ending green energy tax credits.
Democrats in the Senate tried to use a rule called the Byrd Rule. This rule stops parts of a reconciliation bill that don't directly relate to the budget from being passed with only 51 votes. The Senate Parliamentarian (an expert on Senate rules) ruled that several parts of the bill violated this rule. This meant those parts had to be removed.
On June 28, the Senate began a long process called "vote-a-rama." During this time, senators can propose many amendments (changes) to the bill. This "vote-a-rama" lasted over 24 hours and set a record for the most amendment votes in Senate history.
The bill passed the Senate on July 1, 2025, by a close vote of 51–50. All Senate Democrats voted against it. Three Republicans also voted against it. Vice President JD Vance cast the tie-breaking vote in favor of the bill.
Second House Vote
For the bill to become law, the House of Representatives had to pass the exact same version that the Senate passed. This was also a challenge, as some House Republicans still had concerns about the bill.
After more negotiations, the House approved the final version of the bill on July 3, 2025, by a vote of 218–214. Most votes were along party lines. Two Republicans and all Democrats voted against the bill.
Parts That Were Removed
Some parts were in earlier versions of the bill but were removed before it became law. These included:
- A rule that would have stopped federal courts from enforcing some orders without a bond.
- A 10-year ban on states making their own rules about artificial intelligence (AI). This was removed because it wouldn't pass.
- A tax on solar and wind energy projects.
- A proposal to sell millions of acres of federal land in the Western United States.
Many other parts were removed to follow the Byrd Rule in the Senate. These included:
- The official short title of the bill.
- A ban on certain practices by pharmacy benefit managers.
- A ban on using federal money in Medicaid and other programs for gender-affirming care.
- Changes to Medicaid funding for Alaska and Hawaii.
- Expanding Pell Grants for short-term job training.
- Removing taxes on gun silencers.
What the Bill Does
National Debt
The Congressional Budget Office (CBO) first thought the OBBBA would add $2.4 trillion to the national debt of the United States by 2034. They later increased this estimate to $2.8 trillion. Some Republican members disagreed with these numbers.
Social Safety Net Risks
The CBO believes the OBBBA will cause 10.9 million Americans to lose their health insurance. The cuts to Medicaid are the largest in the program's history. This could lead to rural hospitals closing. Losing health coverage for millions of people is expected to make it harder for hospitals and nursing homes to pay their bills. Experts also say the bill could speed up when Social Security and Medicare run out of money. They argue the bill will move wealth from poorer people to richer people.
Clean Energy Setbacks
The New York Times said the bill could hurt renewable energy production and research in the U.S. It might also make China a leader in clean energy. The bill's rules favor fossil fuel companies over renewable energy like solar and wind. This could lead to job losses and less investment in clean technologies. The bill removes most clean energy tax breaks from the Biden-era Inflation Reduction Act.
More Immigration Enforcement
The U.S. government has given a lot of money to ICE for detention centers and deportations. ICE now has more funding than any federal law enforcement agency in U.S. history. This increased funding is expected to lead to many detentions and deportations. It will also make it harder for people to get asylum.
Education Access
The bill adds new rules for colleges. It also changes how student loans work. It sets limits on how much graduate students can borrow. Critics worry the bill could make it harder for low-income students to go to college. It might also shift public money to private schools.
Common Misunderstandings
Taxes on Social Security
The Social Security Administration sent an email suggesting that federal income taxes on Social Security benefits would be removed by the bill. However, experts say this is misleading. The bill adds a temporary $6,000 deduction for seniors. This can lower their tax bill but doesn't directly remove taxes on Social Security benefits.
Taxes on Tips
The "No Tax on Tips" part of the bill only affects federal income tax. It does not remove Social Security, Medicare, state, or local taxes on tips. Workers still need to report their cash tips as income. The deduction can reduce how much federal tax they owe.
Medicaid and Undocumented Immigrants
Some people claimed the bill means undocumented immigrants are on Medicaid. However, undocumented immigrants are already not allowed to get full Medicaid benefits. Many get health care from state-funded programs instead. The bill's rules could cause some states to cut these state-funded programs. This might lead to about 1.4 million people losing state-level health coverage, including undocumented immigrants.
Medicaid and Unemployment
When talking about the bill's impact, USDA Secretary Brooke Rollins said that 34 million able-bodied adults on Medicaid should be working. However, about 70% of Medicaid recipients already work at least 35 hours per week. They still qualify because they earn low wages. Overall, only about 3% of Medicaid recipients are both able to work and have been unemployed for a long time.
See also
- Bush tax cuts
- Omnibus spending bill
- Tax reform
