The sweeping 900-page tax and spending law signed on July 4 introduces a wide array of provisions that touch nearly every American in one way or another. Raymond James Chief Investment Officer Larry Adam and team break down what they consider to be the most important elements of the new legislation. Some have direct implications for investment strategy, while others affect everyday decisions we face as taxpayers and consumers alike.
The big picture: A 10-year price tag of $3.25 trillion, highly front-loaded
According to nonpartisan analysts at the Congressional Budget Office (CBO), the new law is projected to increase the national debt by $3.25 trillion over the next 10 years, making it the single most expensive piece of legislation in US history. This estimate combines $4.46 trillion in tax cuts with $1.21 trillion in spending reductions.
This cost is highly front-loaded. The CBO anticipates the economic stimulus to peak in 2027, driven largely by immediate tax relief measures. Spending cuts are structured to take effect in later years, creating a delayed counterbalance. This sequencing makes the overall 10-year cost appear less onerous but introduces the potential for a fiscal cliff to hit the economy in 2029-2030. Should Congress decide to extend the cuts that are temporary, as is historically common, the real deficit impact could surpass current projections.
What will this mean for the economy?
Despite its hefty price tag, the legislation doesn’t markedly alter the overall economic trajectory. The Joint Committee on Taxation analyzed an earlier version of the bill and estimated that it would raise average annual GDP growth over the 2025-2034 period by a mere 3 basis points – from 1.83% to 1.86%.
Below, Adam and team rank the law’s key provisions by fiscal impact.
No. 1: Income tax cuts from 2017 are extended on a permanent basis
Projected 10-year cost: $3.6 trillion.
The new law extends indefinitely the lower tax brackets – ranging from 10% to 37% – that were enacted by the Tax Cuts and Jobs Act in 2017. This provision carries the greatest fiscal impact. The projected cost of $3.6 trillion over 10 years exceeds the total cost of the legislation.
No. 2: The child tax credit is permanently expanded
Projected 10-year cost: $817 billion.
The new law makes the 2017 temporary change permanent and raises the child tax credit to $2,200 starting in 2026, with annual inflation adjustments thereafter. The credit begins to phase out for single filers earning over $200,000 and joint filers over $400,000.
No. 3: The SALT deduction quadruples to $40,000, but only through 2029
Projected 10-year cost: $163 billion, however, the actual price tag will probably be higher, assuming Congress acts in the future to prevent the reversion to $10,000 in 2030.
The new law temporarily raises the state and local taxes (SALT) deduction to $40,000 starting in 2025, followed by a 1% annual increase through 2030, where it then reverts the cap back to $10,000.
No. 4: Businesses can deduct domestic R&D costs immediately, rather than over five years
Projected 10-year cost: $141 billion.
While most of the new law focuses on individual taxpayers, it includes key provisions for businesses too – especially around R&D deductions. Starting in 2025, companies can fully deduct these R&D expenses in the year they're incurred, permanently eliminating the need to amortize.
No. 5: There is a brand-new deduction for seniors, but only through 2028
Projected 10-year cost: $93 billion, however, the actual price tag will probably be higher, assuming Congress acts in the future to prevent the deduction from expiring.
The new law offers a temporary deduction for taxpayers age 65 and older. The deduction begins in 2025 and ends in 2028. It phases out for single filers earning over $175,000 and joint filers over $250,000.
No. 6: There is a new deduction for charitable contributions, even if you don’t itemize
Projected 10-year cost: $74 billion.
Starting in 2026, most taxpayers who take the standard deduction will be able to claim a deduction for charitable contributions: Up to $1,000 for a single taxpayer, or $2,000 for married filing jointly. This provision is permanent.
No. 7: No tax on tips – but with some fine print, and only through 2028
Projected 10-year cost: $32 billion, however, the actual price tag will probably be higher, assuming Congress acts in the future to prevent the deduction from expiring.
The new provision delivers a deduction of up to $25,000, starting in 2025 and ending in 2028. It applies only to occupations where tipping is customary, though specific guidelines will be defined by the Treasury to prevent misuse. The deduction phases out for single filers earning over $150,000 and joint filers over $300,000.
No. 8: The tax credit for semiconductor plants gets a boost to 35%
Projected 10-year cost: $15 billion.
The Advanced Manufacturing Investment Credit offers a tax credit for domestic semiconductor facility construction. Previously set at 25% of capital spending, the new law raises that credit to 35%. To qualify, projects must still begin construction by the end of 2026.
Here’s a look at some of the provisions that are projected to create budgetary savings:
Clean energy tax credits will be phased out more quickly
Projected 10-year savings: $444 billion.
Federal tax credits for clean energy – ranging from long-standing programs to those created under the Inflation Reduction Act of 2022 – have traditionally been temporary, subject to expiration and renewal. The new law shortens the availability window for many of these credits, including those for electric vehicles and solar power systems.
New or expanded work requirements for SNAP and Medicaid recipients
Projected 10-year savings: ~$1.03 trillion, $185 billion from SNAP and $841 billion from Medicaid, which is largely predicated on the CBO’s assumptions of expected drops in enrollment.
The new law imposes tougher work requirements on the Supplemental Nutrition Assistance Program (SNAP) and Medicaid for non-disabled adults up to age 64.
Changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors we are not qualified to render advice on tax or legal matters. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
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