Recently signed by President Trump as his “One Big Beautiful Bill” is the biggest tax relief bill in American history for working families. Signed into law on July 4, 2025, the bill fulfills campaign promises to bring meaningful money relief to working families and middle-class families nationwide.
The $10,900 family benefit split
The banner figure $10,900 top estimate of extra a-year take-home pay for families results from the interaction of a number of different tax policies. Official estimates assume the average family will enjoy larger paychecks of $10,000+ extra a-year take-home pay, with some estimates suggesting families will be able to claim up to $13,300 of extra take-home pay.
This significant relief is made possible by a set of principal mechanisms combined that lower the tax load on working families:
- Strengthened Child Tax Credit: Raised from $2,000 to $2,200 per qualifying child
- Bigger Standard Deduction: Keeping the doubled deduction employed by 91% of taxpayers
- No Taxation of Tips: Up to $25,000 per year for qualifying workers
- No Taxation of Overtime: Up to $12,500 for individuals or $25,000 for couples
- Earned Income Tax Credit: Up to $8,046 for families with three or more children
Expanded Child Tax Credit provides direct family support
Perhaps the biggest change for children is the increase in the Child Tax Credit. The credit rises from $2,000 to $2,200 per qualifying child with breathtaking increases in access. For the first time ever, only one parent must have a Social Security number to qualify, opening up the credit to many mixed-status families.
The worthy amount does not change at $1,700 per child, and families can claim it as a cash refund even if they do not owe tax. This single provision benefits more than 40 million American families that depend on the Child Tax Credit to cover basics like rent or a mortgage, food, and childcare.
Breakthrough “No Tax” provisions change workers take-home pay
Two groundbreaking provisions cut federal income taxes on certain forms of compensation, providing relief to millions of employees instantly:
No tax on tips
Service workers are currently allowed to exclude up to $25,000 of tip income from their federal taxable income. The advantage is extended to employees who “customarily and regularly receive tips” and phases out for employees with incomes above $150,000 ($300,000 for married couples filing jointly). The provision would apply to about 2 million restaurant workers and bartenders across the country.
No tax on overtime
Employees can exempt as much as $12,500 of overtime compensation (or $25,000 for couples who are married) from their federal income tax. This is applicable to the premium rate of overtime compensation—for instance, if an employee who earns $20 an hour is paid $30 in overtime, only the excess $10 can be excluded from taxation.
Both provisions take effect January 1, 2025, through December 31, 2028, and deliver four years of assured relief for working families.
Broadened Earned Income Tax Credit helps low-income families
The Earned Income Tax Credit remains an essential lifeline for low-income working families. For tax year 2025, the credit maximum increases to $8,046 for families with three or more qualifying children, up from $7,830 for tax year 2024.
The EITC credits are designed to benefit the most those who can benefit from it the most:
- $649 for those with no qualifying children
- $4,328 for families with one qualifying child
- $7,152 for families with two qualifying children
- $8,046 for families with three or more qualifying children
To be eligible, families must have earned income of less than $66,819 based on filing status and number of children.
Child Care Tax Relief battles rising costs
Acknowledging that two out of every three young children under the age of five live in households where both working parents are working, the bill contains major expansions of child care tax incentives. The enhancements are the first overall revisions to some of the provisions since 1986.
The Child and Dependent Care Tax Credit has also been made more beneficial, with the families of two small children with incomes less than $150,000 normally having their benefit rise by around $900. The law also raises the Employer-Provided Child Care Credit and lifts Dependent Care Assistance Plans.
Standard deduction raises are widespread relief
Increased standard deductions in 2025 benefit all taxpayers. The IRS has released the following increases:
- Single filers: $15,000 (up by $400 from 2024)
- Married filing jointly: $30,000 (up by $800 from 2024)
- Head of household: $22,500 (up by $600 from 2024)
These increases allow taxpayers to shield more of their money from taxation, providing immediate relief to the 91% of taxpayers who use the standard deduction.
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