Congress passed Trump's sweeping tax bill. Here's how it'll affect your returns

The passage of President Donald Trump's massive tax and spending bill last year carries vast implications for Illinois taxpayers, with scorekeepers saying the wealthiest filers are likely to reap the most benefits.

The bill, often called the One Big Beautiful Bill Act, was signed into law July 2025 and made permanent several provisions in Trump’s old Tax Cuts and Jobs Act, which expired Dec. 31, 2025.

“The OBBBA [One Big Beautiful Bill Act] came into existence to address the impending expiration of the tax cuts from the Tax Cuts and Jobs Act of 2017,” said Jodi Mersinger, managing director of tax and business services at the Chicago office of CBIZ, a Cleveland-based professional services firm.

"The idea was for a comprehensive singular bill to cover a full agenda in one sweeping piece of legislation. For the most part, it's a very tax-advantaged legislation with certain tax cuts being made permanent and others expanded."

The bill introduces a number of tax policy goals that Trump touted on the campaign trail. It establishes deductions such as the so-called "no tax on tips" and "no tax on overtime," as well as deductions for seniors and qualifying new car loans. And it temporarily raises the cap on the deduction for state and local taxes.

But the act includes more than just tax cuts. It makes spending cuts to certain federal programs, as well as boosts spending for some agencies. Changes include an estimated $170 billion toward immigration enforcement, more than $150 billion toward military spending, phasing out clean energy credits like the electric vehicle tax credit, requiring states to pay more for food aid programs and cutting Medicaid spending by more than $900 billion over 10 years, according to the Congressional Budget Office.

The megabill will upend household finances, but it will also provide more clarity for financial planning, financial advisers have said. One example is it extended the current tax rates and brackets, which were enacted in 2017 and set to expire last year. It also adds several new stipulations that could be beneficial for certain professions, such as teachers, coaches and hospitality workers.

What’s new for taxpayers

For Illinois residents, the most significant change is the increase of the state and local tax, or SALT, deduction from $10,000 to $40,000, according to Scott Neubauer, a financial adviser at Wisdom Investments in Hoffman Estates.

“Given our state’s consistently high property taxes, that’s a notable amount of relief for many homeowners,” he said.

The higher deduction took effect in 2025, with an increase of 1% per year through 2029. It'll revert to $10,000 if further legislation isn't enacted.

Prior to the revision, many taxpayers opted to forego itemized deductions, leading most to take the standard deduction, experts said.

Families are in line to benefit from an expanded child tax credit, new child savings accounts, adoption tax credit and broader eligibility for 529 plans, which offer tax advantages and other incentives for future education costs such as tuition, expenses and student loan repayments.

The child tax credit was increased for 2025 by $200, making the credit $2,200 per qualifying child for parents or guardians with an annual income of less than $200,000, or $400,000 if filing jointly. And the value of the credit adjusts for inflation in subsequent years.

But now the child and taxpayer — or couple, if filing jointly — must have a Social Security number to claim the credit. The requirement would make more than 4.5 million children in the U.S. ineligible, the vast majority of whom are citizens, because one or both of their parents lack a Social Security number, according to the National Immigration Forum.

The budget bill also creates so-called “Trump Accounts,” which function like a traditional individual retirement account. Those born between Jan. 1, 2025, and Dec. 31, 2028, will receive a one-time $1,000 deposit from the U.S. Department of Treasury. The funds are invested in low-cost stock index funds, which mirror the performance of an index such as the S&P 500.

Parents and others can contribute up to $5,000 annually until the child turns 18, starting in July. An employer may contribute up to $2,500 toward the cap. State and local governments and private charities will be allowed to make broad contributions.

Parent contributions are after-tax, and the money isn't taxable when it's withdrawn, according to Fidelity. Any earnings on the contributions, however, are taxed when they're withdrawn.

Meanwhile, new tax rules will affect some Illinois seniors.

The enhanced senior deduction allows taxpayers 65 and older to deduct an additional $6,000 from 2025 through 2028. The benefit phases out for single taxpayers with modified adjusted gross income between $75,000 and $175,000, and for married joint filers, between $150,000 and $250,000.

The deduction, which primarily benefits those in the 10%, 12% and 22% marginal tax brackets, creates a new wrinkle in tax planning, according to Anthony Pellegrino, founder and CEO of Oakbrook Terrace-based Goldstone Financial Group, which evaluates Roth conversions for clients in the 22% bracket.

“In many cases, the long-term savings from completing a Roth conversion still outweigh the value of the new deduction, but this will now require case-by-case analysis to avoid unintentionally reducing or eliminating the deduction due to MAGI increases,” he said.

Tax filers and planners will have to evaluate whether paying taxes now via a conversion is more beneficial, particularly if individual tax rates in retirement are expected to be the same or higher than current rates.

The White House estimates the federal senior deduction will benefit nearly 34 million Americans.

Other federal provisions offered in the bill include deductions on overtime pay and qualified tips.

From the tax years between 2025 and 2028, single filers can deduct up to $12,500 of qualified overtime pay, or $25,000 for joint filers. The deduction phases out for those earning over $150,000 for individuals and $300,000 for joint filers.

Employees and self-employed workers may be able to deduct qualified tips. Workers in certain tipped occupations can deduct a maximum of $25,000. For self-employed workers, it must not exceed their net income. The deduction also phases out for filers earning more than $150,000 for individuals and $300,000 for joint filers.

Carve-outs for the wealthy

Households earning $460,000 to $1.1 million get an estimated $21,000 tax cut, boosting their after-tax income by 4.4%, according to the Washington, D.C.-based Tax Policy Center.

Middle-income filers who make $67,000 to $119,000 can expect a tax cut of about $1,800, on their 2026 return, raising their after-tax income by 2.3%.

By contrast, low-income taxpayers making less than $35,000 will receive a $150 tax cut, or less than 1% of after-tax income, similar to the rates in the 2017 tax legislation.

The top income tax rate was expected to increase from 37% to 39.6% this year, following the expiration of the Tax Cuts and Jobs Act, but the new budget bill made the 37% rate permanent.

The standard deduction also increased for the 2025 tax year to $15,750 for single filers and $31,500 for married couples filing jointly. The amounts are also adjusted for inflation each year.

“Extensions ate up most of the budget [bill] for tax changes,” said Ed Lyon, a Cincinnati-based tax consultant who worked on Capitol Hill during the 1986 Tax Reform Act. “That was the primary goal of the bill.”

He said the bill definitely favors high-income taxpayers.

“Low-income Americans typically don’t pay enough federal income tax to see significant changes,” Lyon said. “And middle-class taxpayers typically don’t itemize, which means they miss most of the new breaks too.”

The bill also increased the estate, gift and generation-skipping transfer tax exemptions, which started Jan. 1.

For wealthy taxpayers, this means the amount that can be passed on to heirs — free from federal estate tax — is now $15 million per individual and $30 million for a married couple, with annual adjustments for inflation.

Without the legislation, the exemptions would've reverted from last year's $13.9 million cap to about $7 million this year.

“High net worth individuals have a reason to celebrate,” Brad Werner, partner at the Chicago office of Milwaukee-based Wipfli and Wipfli Advisory, said. “For families and advisers, this is a chance to review estate plans in light of the favorable amount of exemption.”

Who wins, who loses

The megabill solidifies some of Trump’s long-held goals that were championed for years, like the elimination, or phaseout, of several clean energy tax credits for electric vehicles and residential installations — key tenets of former President Joe Biden’s Inflation Reduction Act of 2022.

Many of the tax cuts benefit high earners while the bill reduces spending on safety net programs, often beneficial to low-income households.

Access to certain social programs, including Medicaid and the Supplemental Nutrition Assistance Program, will become more restricted with new work requirements and other enrollment verification, tax experts said.

The Congressional Budget Office projects the number of uninsured Americans will increase by more than 10 million by 2034 due to cuts in the Affordable Care Act and Medicaid.

Medicaid, the joint state and federal program that helps low-income participants cover medical costs, will see more than $900 billion in cuts over the next decade, the office said.

Given the SALT deduction changes, the biggest winners are middle- and high-income earners, receiving between $150,000 and $500,000, according to Tal Binder, CEO of Gelt, a Miami-based tax platform.

“The larger policy question now is how the government will ultimately fund these measures and manage the growing national debt because tax reductions are only sustainable when paired with responsible spending,” he said.

Under the bill, the federal deficit is expected to soar to about $3.4 trillion over 10 years, as tax cuts are only partially offset by spending reductions, according to the Congressional Budget Office.

Chicago-based Heather Hunt-Ruddy, who heads the central region of Wells Fargo Advisors, said "permanent pertains only to the features of the current legislation. ... Any of them can be changed with new legislation in the years ahead, with likely shifts in the congressional power balance between Republicans and Democrats.”