President Trump's new budget legislation, which he signed on July 4, could affect your wallet next year. CBS News business contributor Javier David has more details.

Washington

Congress has approved President Trump's latest budget legislation, which is expected to lower tax bills for many Americans in 2026. According to the Tax Policy Center, the average taxpayer could see a reduction of $2,900, with higher earners benefiting even more. The bill extends the 2017 tax cuts, maintains current rates for businesses and households, and introduces new deductions for hourly workers, seniors, parents, and those with auto loans or high state and local taxes.

A notable feature is the introduction of a 'baby bonus' account, allowing parents of children under eight to receive a $1,000 government contribution, with additional contributions from parents and employers. However, eligibility and benefits vary based on income and other factors, and some aspects of the new accounts are considered complex by financial professionals.

How Trump's new budget legislation could impact your taxes in 2026

All right, millions of taxpayers could see a lower tax bill next year now that Congress passed the president's big, beautiful bill. Well, according to a study by the Tax Policy Center, taxpayers will see an average, that's a key word, of $2,900 in 2026. However, higher-earning Americans are likely to see an even bigger boost. Javier David is here with me now. He is their business editor for the Dallas Morning News and, of course, a CBS News contributor. Javier, good morning to you. So, who are the biggest winners here? I feel like it all has to do with where you are on the socioeconomic scale. Yeah, look, this bill is kind of a deficit spending on steroids, and it's quite possibly inflationary, but it's a mix of kind of crowd-pleasing and budget-busting. So, the big headline here, a number of the things that the president campaigned on are now reality. So, the winners, hourly workers and those who make tips, elderly get a tax credit, parents with young children, people who have auto loans, and some seniors, and those who live in states where you pay a lot of state and local taxes. So, the 2017 tax cuts, remember those? They're going to stick around for a while, so there's no threat of higher rates for businesses and households. If you make tips or overtime, you're not going to get taxed on it. Plus, you get to deduct interest now on some of your auto loans, so those range between 6% and 12%. The cool thing here is seniors that make less than $75,000 a year, they're going to get tax deductions worth $6,000 and a big grain of salt. If you earn less than $500K a year, you can deduct about $40,000 worth of state and local taxes off of your bill every year. Okay, I'm glad you mentioned that $75K a year barrier, because when we speak about middle Americans and hourly workers, it's really hard to know what that really means. So, if you make above $75K, but let's say less than $200,000, how will it hit you? Yeah, I mean, that's basically it. There's a gray area, and if you make above that threshold, you're not going to see the benefit. And obviously, you have a lot of people that, seniors, are mostly, they earn on Social Security. So, if you have just Social Security as an income, you'll probably see the benefit. But if you have some other form of investment income, you're probably not going to see the benefit. Now, for people who are family planning, how might they benefit from this baby bonus that's in the act? Yeah, you know, the Trump accounts, it's controversial. It's kind of a play to boost falling birth rates. It's an acknowledgment that having kids is really expensive, but it's complicated, and a number of financial professionals think that it's just kind of overly complicated. And some of the mix of the money that you make that make up the accounts are partly actually taxable. So, who's eligible? Parents can open up an account for any child under 8. If you were born between this year and 2028, you receive $1,000 for free. That money gets invested in a low-cost fund. The contributions are capped at $5,000. Employers get to kick in $2,500. Both of these amounts are indexed to inflation, and it just grows in this account until about they're 18. But here's the catch. You can't access that money until the child turns 18. And after that, it basically becomes an IRA, and there's a penalty for early withdrawal. Whoever grabbed that picture of a baby taking money out of a piggy bank or maybe putting it in, you got the right image. Javier, I don't know if you could see that, but we've got some great images to go along with your insight. Thanks for joining us today. We really appreciate it.

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