Explainer: What's inside Trump's controversial 'One Big Beautiful Bill'

Lower taxes, tighter immigration rules, healthcare cuts, and a clean energy rollback define Trump's 'Big Beautiful Bill', now headed to the House for final approval

US President Donald Trump’s sweeping tax and spending package—the One Big Beautiful Bill Act—passed the Senate on Tuesday after Vice President JD Vance broke the tie. It now awaits a final vote in the House before it can be signed into law by the President.

 

While it’s been billed by Trump supporters as a pro-growth and pro-worker blueprint, the nearly 900-page legislation carries significant implications for the United States' federal tax policy, social programmes, border enforcement, and the national debt.

 

Here’s a breakdown of what the bill entails—and what it would change if passed into law. 

 

Permanent tax cuts and new deductions

At the centre of the bill is a permanent extension of the 2017 Tax Cuts and Jobs Act, which was set to expire at the end of this year. The legislation locks in lower income tax rates, expands the standard deduction, and extends various business-friendly provisions.

 

 

No tax on tips: Creates a federal income tax exemption for tip income, up to $25,000 per year. The benefit phases out for individuals earning over $150,000.

 

Standard deduction: Permanently expands the standard deduction, nearly doubling the amount filers can subtract from taxable income.

 

Child tax credit: Increased from $2,000 to $2,200 per child. Now it requires only one parent to have a Social Security number.

 

Social security income deduction: $6,000 income deduction for retirees earning under $75,000, plus a temporary $4,000 senior deduction (2025–28).

 

These provisions amount to more than $4.5 trillion in tax reductions over the next decade, according to House estimates.

 

Major cuts to Medicaid and SNAP

To offset the tax cuts, the bill proposes more than $1.2 trillion in spending reductions, largely targeting Medicaid and the Supplemental Nutrition Assistance Programme (SNAP).

 

Medicaid reforms:

 

Work mandate: Starting December 2026, able-bodied, childless adults must work or volunteer at least 80 hours per month to qualify.

 

Stricter work rules: Parents with children aged 15 and older would also be required to meet the 80-hour monthly threshold.

 

More frequent checks: Recipients must verify income and residency biannually.

 

Provider tax cap: Reduces the cap on provider taxes (used by states to fund Medicaid) to 3.5 per cent from 6 per cent by 2032.

 

Hospital fund: Rural hospitals to receive a $50 billion stabilisation fund amid funding cuts.

 

The Congressional Budget Office projects over 11 million may lose Medicaid access if the bill is enacted.

 

SNAP changes:

 

State cost-sharing: States with error rates above 6 per cent would have to pay 5–15 per cent of SNAP costs starting in 2028.

 

Expanded work requirements: Raises the age limit for work-eligible, able-bodied adults without dependents from 54 to 64.

 

State flexibility: States like Alaska and Hawaii could receive waivers if they demonstrate 'good faith' efforts to comply.

 

Immigration and border security

The bill designates $350 billion for border security and immigration enforcement, reflecting Trump’s top domestic priority.

 

Key provisions include:

 

Wall construction: Allocates $46.5 billion for wall construction and maintenance along the southern border.

 

Detention capacity: Expands detention facilities, with $45 billion earmarked for this purpose.

 

ICE staffing: Includes $30 billion for new hiring, training, and equipment for US Immigration and Customs Enforcement (ICE).

 

Asylum application fee: Introduces a $100 fee for asylum seekers. An earlier House proposal to set the fee at $1,000 was removed after a Senate ruling.

 

SALT deduction increase

The state and local tax deduction, or SALT, is capped at $10,000 under current law. The Senate bill increases this cap to $40,000, but only for five years. After that, the cap returns to its previous level.

 

This provision was included to satisfy Republicans from high-tax states, particularly in the House, according to a report by CBS News.

 

Clean energy rollback

 

The legislation phases out Biden-era clean energy tax credits, but more slowly than the House had proposed. This has been a point of contention for tech billionaire Elon Musk, who has threatened to form a new party if the bill is enacted.

 

Phase-out timeline:

 

• Companies breaking ground on wind or solar projects in 2025 would still receive 100 per cent of the existing credit.
• Projects begun in 2026 receive 60 per cent, and those in 2027 get 20 per cent. Credits will end entirely in 2028.
• Projects with supply chains linked to 'foreign entities of concern', such as China, are ineligible for these credits under both the House and Senate bills.

 

Debt ceiling increased

 

The bill raises the debt ceiling by $5 trillion, exceeding the $4 trillion hike in the House version. This provision is intended to avoid a potential standoff over government borrowing later this year, with Treasury officials warning that the US could run out of funds by August.

 

Fiscal conservatives have criticised this provision, calling it a betrayal of Republican pledges to rein in spending.

 

AI regulation clause removed

 

The original bill included a clause that would have prohibited states from regulating artificial intelligence (AI) if they accepted federal tech funding. A bipartisan Senate amendment removed that language amid growing unease about AI oversight at the state level.

 

Why 'Big Beautiful Bill' matters for Trump

 

This is Trump’s most ambitious domestic policy push of his second term. While framed as pro-growth and middle-class friendly, the bill shifts federal priorities toward tax relief and immigration enforcement at the cost of social safety nets and clean energy incentives. The $3.7 trillion projected deficit impact has sparked backlash, even among Republicans.

 

What’s next

 

The House is expected to take up the bill later this week. If passed without changes, it will head to Trump for signature. Any modifications will trigger fresh negotiations with Senate leaders.