The US Senate narrowly passed President Donald Trump’s major tax and spending plan on Tuesday, known as the “Big Beautiful Bill”. After more than 24 hours of intense debate and deadlock, the Republicans got a slim victory with Vice President JD Vance‘s tie-breaking vote. This win marks a key step forward for Trump’s ambitious bill, but it’s far from over. The legislation must now return to the House of Representatives, where it originally passed by just one vote.
The bill still faces strong resistance from some lawmakers in the lower chamber. Despite the challenges, this Senate approval gives Trump and his allies fresh momentum to push the proposal ahead. The bill has become a major test of Republican unity and Trump’s influence over the party, as they try to move forward with sweeping changes to federal tax and spending rules.
This mega tax bill backed by Trump will affect nearly every American. It includes major changes to tax, health care, and energy laws. The bill also brings back the tax cuts Trump introduced during his first term. To help pay for them, it proposes deep cuts to programs like Medicaid, food assistance, and clean energy.
This wide-ranging bill also includes policies on many other topics, such as artificial intelligence, space programs, and immigration. However, the bill is expected to go through many changes before the final Senate vote. Let’s dive into the key controversial points of this mega bill and know exactly what keeps the House and Senate Republicans divided.
Major Medicaid Changes
To help pay for tax cuts in other areas, Republicans have suggested big changes to the medicaid, the US government health program that supports millions of older, disabled, and low-income Americans. Medicaid is one of the biggest parts of the federal budget, and introducing changes to it has led to major political disagreements.
One of the main changes is a new work rule. Starting December 2026, adults without children or disabilities would need to work at least 80 hours a month to qualify for medicaid.
Another change would make people reapply for Medicaid every six months instead of once a year. They would also need to show extra proof of their income and where they live.
The Senate’s version of the bill adds even more rules, which may cause more pushback when it goes back to the House. One proposal would reduce the amount states can collect in provider taxes, which help fund Medicaid, from 6% to 3.5% by 2031.
Some Republican lawmakers, especially from states that rely on these funds for rural hospitals, were against this. In response, the Senate added a $25 billion fund to support rural hospitals and delayed the tax cuts.
The bill also says that parents with children aged 15 or older would need to work or volunteer at least 80 hours a month to stay on Medicaid.
According to BBC, experts have said that the Senate’s version has the toughest Medicaid work rules ever suggested by Republicans and could cause many people to lose their health coverage.
Phasing out clean energy tax cuts
One big difference between House and Senate Republicans is how they plan to handle clean energy tax breaks. Both sides agree on ending the clean energy tax credits that were introduced during Joe Biden’s term. But Senate Republicans want to phase them out more slowly than the House.
For example, the Senate plan gives businesses more time to get these tax breaks if they are building wind or solar farms. Still, both the House and Senate want to block companies from getting the credits if their supply chains are linked to countries like China, which are seen as “foreign entity of concern.”
Under the Senate plan, companies that start building in 2025 can get the full tax break. The credit would shrink to 60% in 2026, then 20% in 2027, and end completely in 2028. The House version wanted to stop these tax breaks almost right away.
Elon Musk had slammed the latest version of the Senate’s bill first time last week, saying it would lead to the loss of millions of jobs in the US and seriously hurt the country in the long run. Posting on X, the Tesla founder said the bill supports outdated industries with government aid while harming newer, growing sectors that are important for the future. “Utterly insane and destructive. It gives handouts to industries of the past while severely damaging industries of the future,” Musk wrote on X.
Removing taxes on social security income
Trump had promised during his campaign to remove taxes on social security income, which is money paid each month to seniors and people with disabilities.
The House version of the mega tax bill didn’t fully meet that promise. Instead, it added a temporary increase in the standard tax deduction which is up to $4,000 for people aged 65 and older. This change would apply from 2025 to 2028.
However, the extra deduction starts to shrink for those earning more than $150,000 as a couple or $75,000 as a single filer.
Meanwhile, Senate Republicans also want to reduce taxes for older Americans. They have suggested raising the deduction amount to $6,000.
Increased deduction limit for state and local taxes (SALT)
The bill introduces deduction limit for state and local taxes (SALT). This was one of the key demands from the few Republican lawmakers in Democratic-run cities.
Right now, there’s a $10,000 limit on how much taxpayers can subtract from what they owe in federal taxes. That limit is set to end this year.
In the new bill, House Republicans want to raise that limit to $40,000 for married couples earning up to $500,000. This was a big issue because a 2017 law during Trump’s presidency set the $10,000 cap to make room for other tax cuts.
To help the bill move forward, Senate Republicans have agreed to the same $40,000 cap—but only until the year 2030.
No tax on tips, car loan deductions, and child credit changes
The House bill supports one of Donald Trump’s key campaign promises which was ending taxes on tips and overtime pay. It also allows deducting interest on car loans, but only if the car is made in the US.
Another part of the bill increases the child tax credit from $2,000 to $2,500, but only until 2028. This benefit would go only to families where both parents have social security numbers.
The bill also suggests raising the debt ceiling by $4trillion. Senate Republicans want it raised even more to $5 trillion. The debt ceiling is the maximum amount of money the US government can borrow to cover costs for programs already approved by the Congress.
The Senate version of the bill allows tax breaks on tips and overtime too, but these would slowly reduce for people earning more than $150,000 a year (or $300,000 for couples).
On child tax credits, the Senate plan offers a smaller increase to $2,200, but makes it permanent. It also requires only one parent to have a Social Security number.