President Donald J. Trump’s sweeping bill that is set to become law on Friday will have wide-ranging implications in Connecticut and across the country on everything from taxes to health care to nutrition assistance.
Many of the tax breaks and provisions will go into effect pretty quickly or in the near future. But some of the cost-cutting measures to pay for the bill will take a couple of years before they kick in, like the most significant changes to Medicaid.
Parts of the bill will be permanent, including the 2017 tax cuts passed during the first Trump administration that were set to expire at the end of this year. That includes lower income tax rates as well as the lower corporate tax rate. But some relief will only last for a few years, like deductions on overtime pay and tips on federal income taxes.
Many of the provisions line up around upcoming elections. Some of more generous tax relief, which could give Republicans a boost in their reelection efforts, won’t expire until after the 2026 midterm elections when control of Congress is up for grabs.
And the reforms to Medicaid and nutrition assistance that could lead to cuts — that Democrats, who all voted against the bill, have warned about — won’t apply until late in Trump’s term and close to the 2028 presidential election.
What taxpayers will see in the near term and when provisions will expire
A number of new or modified tax deductions and credits will go into effect this year, though many are set to expire after a few years. That relief will go toward families, children, tipped workers and seniors, though lower earners will not benefit as much.
The bill modestly and permanently raises the maximum amount of the child tax credit from $2,000 to $2,200 per child under the age of 17 and requires at least one parent to have a Social Security number. Those with lower incomes will not benefit as much because they make too little and the tax credit is not fully refundable.
Changes to state and local tax deductions, known as SALT, will be especially beneficial for higher cost-of-living states like Connecticut. In 2022, state taxpayers had the highest average SALT deduction, around $9,100, just under the current $10,000 cap, according to the Bipartisan Policy Center. That year, 11% of Connecticut’s returns claimed SALT, one of the highest rates in the U.S.
The 2017 tax bill placed a cap on SALT deductions at $10,000. The new legislation raises it to $40,000 and would get phased out for those who make over $500,000, starting in the 2025 calendar year. The cap would increase by 1% each year starting in 2025 through 2029. It would then go back down to the current threshold in 2030.
Workers will be able to deduct overtime pay or tips from their federal income tax, though there are limitations to the amount of the deductions and which workers qualify. The deductions related to tips are capped at $25,000 a year, while workers can deduct up to $12,500 on overtime pay. That relief phases out for those who earn over $150,000 a year or $300,000 if filing jointly.
And taxpayers can deduct up to $10,000 of interest on their auto loans if the car is new and assembled in the U.S. All three of those tax deductions would take effect in 2025 and last through 2028.
Seniors who are 65 and older with low to middle incomes will be able to make an additional $6,000 deduction that will start in the 2025 tax year and run through 2028. The full deduction will apply to those who individually earn under $75,000 a year or $150,000 for couples. It starts to phase out above those income thresholds and cuts off at $175,000 or $250,000 if filing jointly.
The bill will automatically create new savings accounts for newborns born between Jan. 1, 2024 and Dec. 31, 2028. The federal government will contribute a one-time infusion of $1,000 and then allow parents to contribute $5,000 a year up until age 18 that can be invested in the stock market. The secretary of the Treasury will automatically open an account if a parent doesn’t establish one.
On energy, the bill will wind down some of the clean energy tax incentives that were implemented during the Biden administration in the 2022 Inflation Reduction Act soon, while others will take a few years.
Tax credits to make homes more energy efficient as well as electric vehicle rebates will go away by the end of the year.
While some of the Medicaid provisions will take a few years to set in, people will see more immediate effects related to the enrollment process for the Affordable Care Act and its subsidies. Starting next year, there will be requirements to verify an enrollee’s income and immigration status instead of automatic re-enrollment.
What will go into effect over the next few years
States like Connecticut will need to implement big changes to Medicaid and the Supplemental Nutrition Assistance Program, formerly known as food stamps, in the coming years. Some states could be eligible for delays in implementation.
One of the biggest implications of the bill will be on states’ finances as they take on more of the costs associated with these safety net programs. That could have a domino effect on how states fund and structure the programs and lead to reductions in benefits or changes to eligibility standards.
Both programs will institute new work requirements for certain beneficiaries in order to be eligible, while states will take on new costs that were once covered by the federal government.
To qualify for Medicaid as an adult under 65, a recipient will need to work or participate in training, education or community service at least 80 hours a month. That criteria will also apply to parents or guardians who have children 14 and older.
Exemptions will apply to certain groups including parents, guardians or caretakers of children 13 and under or who are disabled, veterans with disabilities, those who are “medically frail” or have serious medical conditions and those who are pregnant. Recipients will now need to prove they are eligible twice a year, instead of once.
This would go into effect on Dec. 31, 2026 at the earliest, though states can apply for a waiver to give them until the end of 2028 to comply with the new requirements.
Almost 950,000 people are enrolled in Connecticut’s Medicaid program known as HUSKY, according to DSS. About 73% of Connecticut adults on Medicaid were working either part-time or full-time, according to a KFF analysis of the 2023 American Community Survey.
The nonpartisan Congressional Budget Office, which analyzes and scores federal legislation, estimated that about 138,000 people could lose Medicaid coverage in Connecticut, with the higher end of enrollment loss up to 172,000.
From 2028 to 2032, it also lowers Medicaid provider taxes, which enables states to increase the amount of Medicaid funding they receive from the federal government. This change will apply to states that expanded Medicaid, which Connecticut did after the enactment of the Affordable Care Act.
Nearly all states use such taxes to increase what they get for Medicaid. Connecticut has levied a provider tax that collects hundreds of millions annually from hospitals then redistributes those funds, plus more, back to the industry. Those return payments technically count as public health care spending and help Connecticut qualify for federal Medicaid grants.
States depend heavily on the federal government to help pay for Medicaid. The state’s Office of Policy and Management projected Connecticut would spend a total of $11.6 billion on Medicaid in fiscal year 2025. The federal government contributed about 59% of that funding, which is about $6.9 billion.
Connecticut Department of Social Services Commissioner Andrea Barton Reeves said she fears people will decide it’s too cumbersome to comply with the requirements and be forced to find coverage that’s higher cost or lower quality. DSS oversees HUSKY and SNAP.
“We believe they’re just going to be so frustrated and so ground down by the process that’s already quite complicated in its current form,” Barton Reeves said in an interview with The Connecticut Mirror on Thursday. “Their health will suffer and we’ll see really bad effects as a result.”
Stricter work requirements will also apply to some SNAP recipients, with similar exemptions to the ones in the Medicaid provision. About 69% of Connecticut households on SNAP already have at least one 18- to 55-year-old member working, according to DSS.
Now, more older Americans will need to work or train at least 80 hours a month to receive SNAP. The bill raises the age limit for able-bodied adults without dependents from 54 to 64. And it also applies to able-bodied adults who have children 14 and older. The bill lowered the age of a dependent, which is currently under age 18.
States may also need to pick up some of the costs associated with SNAP benefits for the first time in the nutrition program’s history. The federal government has always paid 100% of the benefits and equally shared the administrative costs with states.
Starting in fiscal year 2028, states will need to keep their payment error rate below 6% in order for the feds to keep paying for all costs associated with SNAP benefits. Those error rates take into account overpayments and underpayments.
But if it’s higher, states will have to take on anywhere from 5% up to 15%. And they will also need to pay more of the administrative fees starting in fiscal year 2027.
Connecticut’s payment error rate was about 10% in 2024. Based off of that number, the state would hit the top of the threshold and pay 15% of SNAP benefits. But that number will change since Connecticut’s share will be determined by the payment error rate from either fiscal year 2025 or 2026 — and the state can choose between the two. States may be able to delay implementation for another year or two.
In Connecticut, more than 400,000 people got SNAP benefits in 2025, according to the DSS. More than half of the recipients in the state are in families with children. That same year, Connecticut received a total of $894 million in SNAP benefits. The average benefit for each household member per month was about $190.
CT Mirror reporters Katy Golvala and Keith M. Phaneuf contributed to this story.
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
