SALT Cap Raised, Clean Energy Credits Ending: Adapt Your Finances to the “Big, Beautiful Bill”

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A big budget bill passed Congress and the president signed it.

Its beauty may be in the eye of the beholder, but it includes a lot of changes to the federal government's spending priorities, changes that could affect your finances.

So today we'll run it all down for you.

Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerd.

I'm Elizabeth Ayola.

And I'm Sean Piles.

Later this episode, we'll be answering a listener's question about how to save when you're on disability and what we should all know about disability insurance.

But first, our weekly Money News Roundup, where we break down the latest in the world of finance to help you be smarter with your money.

In a moment, our news colleague Ana Helhoski will join us to talk about the recent budget bill that passed in Washington.

But first, Sean, we've got an update to a story we covered a few months ago where we explained a new federal rule.

It was designed to help you cancel subscriptions to everything from newsletters to streaming services and beyond.

This was called the click-to-cancel rule, and it was implemented back in October by the FTC, the Federal Trade Commission.

It was designed to make it just as easy to cancel a subscription as to sign up for one, you know, with a click of your mouse.

Some companies made it way more difficult.

You'd have to call or jump through other hoops.

It was supposed to take effect this week, but now that's not happening.

The Eighth Circuit Court of Appeals vacated the rule, saying that the FTC didn't follow the right procedures in making it.

So it's back to those phone calls and hoops and more clicks.

Great.

All right.

Well, let's get to what is officially called the One Big Beautiful Bill Act, a sprawling federal budget that clocked in at nearly 900 pages from tax cuts and credits to safety net rollbacks.

We can't get to everything.

So we're going to highlight what matters most to households.

And Ana Hilhoski is here with us.

Ana, let's start with taxes.

What's staying, what's changing, and who's going to benefit?

Yeah, those are all pretty good questions, Sean.

And speaking of we can't get to everything, there was about 70 tax provisions in this budget, and they added up to $4.5 trillion in total cuts over 10 years.

And that was mostly because of the Tax Cuts and Jobs Act of 2017, which was made permanent.

And those cuts were supposed to expire at the end of this year, and then it was going to go back to a higher tax rate, but that's no longer the case.

But those cuts primarily benefited higher income folks and corporations, and they're the ones that saw the largest percentage increases compared with the rest of us, middle and lower income households.

Now, the bill makes permanent the standard deduction too, and that was doubled in 2017.

So the new budget will increase that amount.

Seniors are also getting a temporary deduction increase, and that's on top of the standard deduction.

So any senior earning $75,000 or less individually is eligible for a $6,000 deduction.

So Ana, there was also a big change to state and local tax deductions as well.

Tell us about that.

Another deduction that increased significantly is the state and local tax or SALT deduction.

There used to not be a cap on the amount that a taxpayer could deduct for certain taxes, and the 2017 Act set a $10,000 cap, but that was supposed to expire.

The new bill increases that cap to $40,000 beginning in the 2025 filing year, but it's only going to be temporary.

And in tax year 2029, it'll revert back to the $10,000 cap.

and that's really only for taxpayers who itemize and there will eventually be a phase out according to your income.

So a tax credit that parents are pretty familiar with is the child tax credit and the increased amount will be permanent beginning with $2,200 in 2026.

And there are a few other kinds of very specific tax deductions that people should know about as well that are new and piqued my interest.

One is no tax on tips.

We heard a lot about this during the presidential campaigns.

Taxpayers can deduct up to $25,000 in tipped income from federal taxes.

Similarly, there is also no tax on overtime.

Taxpayers can deduct up to $12,500 against overtime pay.

And one that really interested me, even though I'm not in the market to buy a car, is that there's a deduction for car loan interest.

Taxpayers can write off up to $10,000 a year in interest on new loans on cars bought after December 31st, 2024.

Now, there are a couple specific details to mind with this deduction.

One is that these cars must be new and assembly must be completed in the the U.S.

There's also a phase out according to income.

Now, a big perk of these three deductions is that you don't need to itemize to be able to claim them, but they're only available for a short period of time.

Relatively, all three of these deductions are only from 2025 through 2028.

All right, let's move on to clean energy tax credits.

So there are a few tax credits that households might miss with this new bill, more specifically households who are invested in clean energy.

One is the EV tax credit that was available to people who bought new or used electric vehicles.

That particular tax credit will now end on September the 30th, 2025.

So that's this year.

Just for context, the credit provides up to $7,500 for qualifying new electric vehicles or fuel cell electric vehicles and up to $4,000 for qualifying used models.

Now, the second thing you all should know is that two clean energy tax credits for homeowners who make green energy changes to their homes will end after this year.

So they include the home solar tax credit and the energy efficient home improvement credit.

These credits help homeowners get tax credits on things like heat pumps, insulation, ECV chargers, and also solar panels.

All right, there's one more tax-related item to point out, and those are the Trump accounts.

And these are new savings accounts that automatically enroll babies born from January 1st of this year through the end of 2028.

And the federal government plans to seed each account with $1,000.

Now, those babies have to have a Social Security number and be a U.S.

citizen to qualify.

And there are also some contribution restrictions.

So you can only contribute about $5,000 per year and employers can actually contribute up to $2,500 per year.

So you could end up with $7,500 in those accounts every year.

But the distributions aren't going to be allowed till a child turns 18.

Now, Sean, I know that we've talked off-mic about this and you've got some feelings.

Yeah, I think overall there are better options out there, like I would say a taxable brokerage account, which don't have contribution or withdrawal limits.

Also, for most parents, 529 plans are going to be a lot more flexible than the Trump accounts.

They also have higher contribution limits.

But at the end of the day, this is still free money.

If I could get a thousand bucks for a kid, I don't have a kid, but if I did, I would love $1,000 for them.

I would just say don't rely on this solely for all of your retirement and college savings plans needs for your child, but hey, get it if you can.

All right, so we can move on from taxes from here, but I just want to say that the costs of all of these programs are really high.

It's the biggest in the bill.

In order to pay for all these things, you have to cut other areas.

And there could be some really big consequences to those reductions.

And that moves me on to a topic that I have big feelings about.

For context, I studied social policy.

So I love learning about social programs.

And there are going to be some major rollbacks and changes to popular social safety net programs like the Affordable Care Act, Medicaid, and also food assistance.

So the result will be $930 billion in cuts over the next 10 years to Medicaid, Medicare, and also the Affordable Care Act.

Currently, 71 million Americans are enrolled in Medicaid and more than 45 million Americans have health coverage through the ACA, according to government data.

All right, so let's start off with work requirements.

And the first thing the bill does is make it more difficult for people to stay on Medicaid.

So starting any time before December 31st, 2026, states are going to implement work requirements in order to enroll in Medicaid.

Now, non-disabled recipients will have to file paperwork on a pretty regular basis to demonstrate that they're working, volunteering, receiving work training, or going to school at least 80 hours a month.

Some are going to qualify for an exemption, such as those who care for a child, but eligibility rules overall are going to tighten.

For some historical context, this has been done before at the state level.

Arkansas briefly implemented a Medicaid work requirement that lasted only from June 2018 to March 2019.

During that time, 18,000 people, which was about 25% of that population, lost their healthcare coverage.

And that was largely due to failure to report or having documentation, not eligibility.

And on top of that, there was no meaningful increase in employment due to the policy.

There are also some major cuts coming to food benefits.

To help reduce federal spending, the big beautiful bill tightens eligibility for supplemental nutrition assistance program or SNAP and shifts some costs onto states.

There will be up to 230 million in SNAP and food assistance cuts over 10 years beginning in 2028.

It also adds work requirements that could begin as soon as this year, which would include able-bodied recipients ages 18 to 64, up from 54.

The requirements also include those with children older than six years old.

So, about five years ago, I actually was on SNAP.

And as you all know, I have a son.

I was an intern at an addiction rehab facility, and they were paying me maybe like $8 an hour.

So I needed SNAP to help me get groceries while I was looking for a higher paid job.

But I can't imagine, I know it doesn't apply to parents with young kids, but I can't imagine having to jump through a whole bunch of hoops while you're facing financial stress and trying to look for a job and possibly working.

It's tough.

All right, so on to the ACA.

So the Affordable Care Act will tighten rules, which are going to spike marketplace premiums by anywhere from 25% to 100%,

which could make health insurance through these marketplaces prohibitively expensive for many people.

Those changes could lead to an additional 4.2 million people becoming uninsured by 2034, and that's according to the CBO.

Now, there are multiple provision changes to the ACA, and they're going to roll out between 2025 and 2028.

Another area of stress for a lot of consumers is going to be the lack of protections, since funding for the Consumer Financial Protection Bureau was also cut in half by the bill, and that's effective immediately.

In case you're not familiar, that agency oversees the consumer financial industry and they've secured more than 21 billion dollars in refunds and relief for more than 200 million consumers.

Now, the Trump administration has already been targeting the CFPB for dismantling.

So with fewer dollars, the CFPB may be far less able to assist consumers.

Yeah, as someone who's covered scams for many years here at NerdWallet, I'm pretty concerned about what this means for a lot of average people and their susceptibility to fraud of all kinds.

Okay, well, turning now to student loans, lots of changes there.

Current income-driven federal loan repayment plans will sunset on July 1, 2028.

On July 1st, 2026, enrollment in a new repayment assistance program, or RAP, will begin.

That's meant to replace the existing income-driven plans and requires a $10 minimum monthly payment for borrowers and extends the timeline for forgiveness to 30 years.

Now, graduate and parent-plus loan changes that you all should know about.

First of all, funding for graduate-plus loan programs, a type of federal student loan that helps graduate and professional students to finance their education expenses, is going to be ending on July the 1st, 2026.

Lifetime borrowing for graduate studies is also capped.

As a graduate or professional student, the federal lifetime borrowing limit for subsidized and unsubsidized student loans is $138,500.

So what's going to happen here is it implements a new $65,000 cap on parent plus loans as of July the 1st, 2026.

Additionally, there's going to be an annual cap of $20,000 a year per student.

It's a notable change as the current system lets parents borrow up to the full cost of their child's education.

I want to add to this that it's not like programs in college is going to get cheaper.

It just means that people won't necessarily be able to get those advanced degrees because they're not going to be able to afford it.

Or they may be pushed into more expensive private student loans.

Yes, and that's problematic in its own right.

So I want to talk overall about timing in this bill because there's clearly a strategy here with the rollout.

Most of the tax cuts and credits that are given to households and corporations, by the way, are beginning this year.

And the majority of the sweeping social program cuts that we've been talking about won't begin until 2028.

Now, Sean, Elizabeth, what's right in between this year and 2028?

Hmm.

Would that be the midterm election?

It is indeed.

So it's very clear that there is some kind of timing strategy in place right now.

Well, there are also a lot of economic changes and repercussions in this bill.

One is the debt ceiling.

The bill increases the debt ceiling by $5 trillion, which will help the U.S.

avoid a default this summer, which in case you didn't know, we were headed for.

Yes, and avoiding a default is quite good.

But there are some other economic results that are a little bit less positive here.

While the Tax Foundation says that tax cuts will temporarily stimulate growth by encouraging business investment, it's going to be really expensive.

As I mentioned before, the bill adds some $3 $3 trillion to the national debt over the next decade, and the current debt is $36 trillion.

And those main spending areas are tax cuts, as we mentioned before, along with $1 trillion for defense, border security, and immigration enforcement, including $45 billion for the U.S.-Mexico border wall and $45 billion for immigration detention centers.

So I had spoken to our resident economist, Elizabeth Renter, before our recording, and she said, quote, the bill might juice short-term growth, but it will also worsen the national debt problem and hurt lower-income households all right anna thanks so much for walking us and the listeners through all of this there is so much that is entailed in the big beautiful bill and hopefully we have a better understanding of what affects us now yeah and we're going to be following this in the months and years to come Up next, we answer a listener's question about how to save when you're on disability.

But before we get into that, a reminder, listener, for you to send us your money questions.

Maybe you're wondering what all of these changes may mean for you and how you can best navigate them.

Leave us a voicemail or text us on the nerd hotline at 901-730-6373.

That's 901-730-NERD or email us at podcast at nerdwallet.com.

A reminder, listener, we're going to be doing a new budget rehab segment soon, and we need your help.

So, if you're looking for some tips or strategies to improve your budgeting skills, click the link in the episode description to fill out the Google form.

It would make us extremely happy.

In a moment, this episode's Money Question.

Stay with us.

Are you looking for ways to make your everyday life happier, healthier, more productive, and more creative?

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Join us as we explore ideas and hacks about cultivating happiness and good habits.

Check out Happier with Gretchen Rubin from Lemonada Media.

We're back and answering your money questions to help you make smarter financial decisions.

This episode's question comes from a listener's text.

Here it is, as read by NerdWallet's head of multimedia content and my boss and also Elizabeth's boss, Hilary Georgie.

Hi, I just found your podcast.

Thank you for the content.

Taking you up on your offer and submitting a question.

My question is a tough one.

I am a 35-year-old female who went from being an athlete and personal trainer to needing to be on disability.

It may need to be permanent.

Needless to say, there has been a lot of grieving.

One of the many components of grief is the feeling of hopelessness.

I earned a scholarship for best business plan in my graduating class and prided myself and identity as an entrepreneur.

Now I'm capped at what I can earn.

I need disability.

Without it, I was in the ER monthly.

I'm looking into starting a non-profit organization, but still struggle.

Any words of advice for those on disability?

Is saving ever an option when you're on the poverty line?

To help us answer our listener's question on today's episode, we have personal finance nerd Kate Ashford, who is not a stranger to the pod.

Hello, Kate.

Hi, Elizabeth.

Happy to be back.

Hey, Kate.

So let's start by talking about the complicated yet vitally important world of disability benefits.

Can you outline what they are and how they work?

We're going to assume that the listener is referring to social security Disability Insurance benefits here.

Social Security Disability Insurance, or SSDI, is a benefits program run by the federal government that provides income to people with qualifying disabilities.

So in general terms, you qualify if you can't work because you have a disability that is either expected to result in death or it's lasted or it's expected to last for at least 12 months.

You also must have worked for at least five of the previous 10 years, although people under age 24 may not need as much work history.

And there's a separate definition for children under 18, but we're not getting into that today.

Every so often, the Social Security Administration will review your situation and make sure that you still qualify.

And that top line explanation really underscores how complicated all of these rules are around how you can qualify for this program.

We should clarify that we're talking about SSDI, which, as you just laid out, is not the same thing as supplemental security income or SSI.

So there's SSDI and SSI.

So it's a little confusing.

That's right.

Social Security Disability Insurance SSDI is not the same thing as Supplemental Security Income SSI, which also provides pay to people with disabilities or who are blind or who are 65 or older, but there are much stricter income and asset limits.

And SSI is need-based.

So you can't have more than $2,000.

in countable assets.

So it's a little different.

Now, something I know to be true about SSDI is usually you get just enough to cover necessities and benefits, and it tends to be just above federal poverty level income.

How can a listener and others save when working with disability or little income?

So in 2025, Social Security disability insurance can be as high as $4,018 a month, but the average monthly benefit this year so far is just a little over $1,500 a month.

So yeah, that's tough.

The calculation is based on your lifetime average earnings covered by Social Security.

The good news is that people receiving these benefits can have a savings account and there are no limits to how much money is in it.

The bad news is when your income is low, it's really hard to save.

With how inflation has been over the years, I can imagine that that might be a hard income to live off of.

So with that said, what are some ways that people can grow their income?

One thing that comes to mind is investing, even if you only have a little bit to put towards it.

It's a tricky question because the idea behind federal disability benefits is that you can't work.

So if you're working and earning income, you could lose your benefits.

So your monthly earnings are capped if you want to hang on to your disability pay.

You mentioned investing and actually investing income like interest and dividends and capital gains don't count toward income limits when you're on disability.

That said, I think it's safe to say that most people in this situation don't have a steady flow of extra income to regularly invest.

So you're limited to whatever invested savings you might have already.

So our listener, despite being on disability, they really want to do things with their life.

They are considering starting a nonprofit.

So can you explain what it might look like to start such an organization, like a nonprofit, a business, or even work while receiving SSDI?

What might be the financial implications of that?

The Social Security Administration has set up a system for this with really specific guidelines.

The precise details are a little complicated, but the gist is you can't earn more than a certain amount, around $1,200 to $1,600 over the course of a set amount of months without your benefits being reduced or ending altogether.

Again, another example of how complicated and restrictive these benefits can be.

For many folks on disability, they may want to work, but if they earn above what's quite a low threshold, the benefits that they rely on could be in jeopardy.

And that leaves a lot of folks like our listeners in a bind.

I want to ask you, Kate, are there any legal, I'm going to emphasize on legal here, loopholes or way to deduct expenses so that people can lower their income when they're on disability?

Sure.

Elizabeth, one thing to note here is that although there are limits on earnings, in some circumstances, you are able to deduct the cost of work expenses that are related to your disability.

So, like a wheelchair, specialized work equipment, co-payments for prescriptions.

So, your actual income could be higher than the threshold and still meet requirements after you deduct expenses.

And before you ask, yes, you can start a nonprofit and take no salary or a small salary, but the Social Security Administration may decide to evaluate your work work based on the value you are providing versus the small salary you're taking.

So if you're paying yourself $1,000 a month, but you're working 40 hours a week, they may decide you're basically doing the work of a full-time employee.

So you could be a full-time employee and you could lose your benefits.

So it's probably a good idea to consult a professional like a financial advisor or an attorney if you're pondering these sorts of decisions.

So the listener also mentioned feeling hopeless because they went from being an athlete and a personal trainer to being on disability.

How can people going through such a major transition move past those emotions?

Sean, you always say part of being a CFP is being a therapist.

So I'm popcorning that to you as well.

So I'm not going to lie, this is really hard.

And the conversation has me thinking a lot about my twin sister who struggles with a number of health issues that have led her to being out of work many times over the years.

She's tried to get on disability and was denied.

And it's all just so exhausting because she would love to work, but she physically can't most of the time.

And so, given how hard this is, the best thing to do is often lean on your loved ones for emotional support.

You know, I'm there for my sister when she needs me.

Even when she doesn't need me, I'm always there pestering her.

And she also has a wonderful husband who is a huge help.

And all of this just makes a hard situation a little bit easier to endure.

And also, you know, nothing beats a good therapist, too.

So, Kate, do you have any thoughts on this?

Sean, I second the good therapist for sure.

I think it's completely valid to feel a sense of loss for a life shift like this, especially if you identify as this kind of person in this role and suddenly that role is gone or really different.

And I'm sure there are a lot of ways people can handle this, but I think it's helpful to think about the fact that you are still you.

You still have the same core values, and maybe you can point that sense of purpose toward a new set of goals.

But you have to give yourself time to adjust and refocus.

Absolutely.

And this discussion makes me think of a statistic I came across, which is that more than one in four adults in the U.S.

have some type of disability.

So what are some financial guardrails people can put in place to prevent losing a chunk of present and future income if they happen to become disabled?

Disability insurance is one option that I can think of.

Yes, disability insurance is key here.

There are two types, short-term, which covers temporary disabilities.

typically three to six months, but even up to a year.

And long term, which as you might expect is for disabilities that last longer.

But it's really important to make sure you have an emergency fund with at least three to six months of living expenses in it, especially because sometimes it can take time for disability benefits to kick in.

And if your situation looks like it could be long term, apply for disability as early as possible because it can take a while to get approved.

Well, let's talk about who needs disability insurance.

Something that comes to mind as well is another stat that one in four workers will face an accident or illness during their lifetime that will keep them out of work for at least a year.

So it sounds like something that most people should at least be considering.

Sean, that's a really powerful statistic.

And really, anyone who earns income should have disability insurance.

But if we're being picky, it's most important for the sole provider of a family, people who support children, people who work in physically demanding jobs, and those with chronic or recurring health issues.

So if someone depends on your salary or there's a good chance that an injury or illness could really make it impossible for you to keep working, disability insurance would be a smart move.

And keep in mind that a good disability policy is for your own occupation, meaning that you can't do your current job.

So it's easier to become unable to be a firefighter, say, than being administrative staff.

And that's in contrast to what can be called any occupation, disability insurance, which means that you wouldn't be able to do any type of job to qualify for the benefits.

And this just kind of opens up the can of worms of how complicated different types of disability insurance can be.

For sure.

Hopefully we're simplifying it for you listeners.

Yeah, we're putting a cap on this can.

All right, Kate.

So where should people begin to look for disability insurance?

Some employers offer disability insurance.

So that may be a good jump-off point.

And I'm also aware that over 35% of employers offer some type of disability insurance to their employees, according to data from the Bureau of Labor Statistics.

If you have access through work, that's a great option and usually much less expensive because employers typically cover part or all of the premiums.

If you don't have access through work, start with a disability insurance broker who can give you quotes from multiple insurers.

And also, you should get quotes directly from major insurance companies who aren't on their list.

You should get multiple quotes because pricing can differ from provider to provider.

And you should aim to cover at least 60% of your gross income.

Then is it worth getting a supplemental policy?

Even if you have coverage through work, you may want one.

You may want supplemental disability benefits because employer benefits will be taxed and you usually can't take the insurance with you when you leave that job.

Disability insurance on the open market can be expensive.

So ask your broker about ways to bring the cost down, like choosing a longer elimination period, which is the period before benefits kick in, or buying a policy that covers a shorter benefit period like five years.

And maybe this goes without saying, but I'm going to say it.

You can't buy disability insurance once you are disabled, or at least not for the condition that's disabling you.

So this is something you should buy buy now when you're healthy.

Good advice.

Well, Kate, thank you for coming on and talking to us about the ins and outs of disability.

Absolutely.

Thank you for having me.

That's all we have for this episode.

Remember, listener, that we are here to answer your money questions.

So turn to the nerds and call or text us your questions at 901-730-6373.

That's 901-730-NERD.

If email is more your thing, you can shoot us one at podcast at nerdwallet.com or check out the link in the episode description to anonymously submit your budget.

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And here's our brief disclaimer.

We are not your financial or investment advisors.

This nerdy information is provided for general, educational, and entertainment purposes.

And honestly, it might not apply to your specific circumstances.

This episode was produced by Tess Viglin and Ana Hilhoski.

Hilary Georgie helped with editing.

Nick Charissimi mixed our audio.

And we want to say a big thank you to NerdWallet's editors for all the help they give us.

And with that said, until next time, turn to the nerds.