Does the Big Beautiful Bill Raise Taxes on the Poor 2026?
Here’s the truth: the Big Beautiful Bill doesn’t directly raise income taxes on low-income families. But the poorest Americans still end up worse off.
The reason? The 10% of poorest Americans will lose roughly $1,200 a year as they experience restrictions on government programs like Medicaid and food assistance, according to the Congressional Budget Office.
Meanwhile, the richest 10% of Americans will see their income increase by $13,600 from tax cuts.
What You Need to Know Right Now
The One Big Beautiful Bill Act became law on July 4, 2025. It makes permanent most tax cuts from the 2017 Tax Cuts and Jobs Act and adds new provisions.
For low-income families, the tax side is complicated. You might see small tax cuts or breaks even—but program cuts hit hard.
Bottom line: Low-income households face benefit reductions that outweigh any modest tax relief they might receive.
What You Came to Know
How the Bill Affects Income Taxes
The Big Beautiful Bill doesn’t raise income tax rates for any bracket. The 7 tax brackets as defined by the original 2017 TCJA with a top rate of 37% for higher earners and a bottom rate of 10% for lower earners remain the same.
The standard deduction would be made permanent and increase to $15,750 for single filers and $31,500 for joint filers.
This means most low-income families won’t pay more in income tax. Some might even pay slightly less.
The Child Tax Credit Situation
The Child Tax Credit increased from $2,000 to $2,200 per child, with permanent phaseout thresholds of $200,000 for single filers and $400,000 for married filing jointly.
But here’s what most sites won’t tell you: Low-income Black households will not benefit from increases to the child tax credit because they do not earn enough money to receive it, effectively blocking millions of children in working families from receiving the $2,200 tax credit.
The credit isn’t fully refundable at lower income levels, leaving the poorest families behind.
New Tax Breaks Don’t Help Everyone
The bill includes tax breaks for tipped workers and overtime pay. Workers can deduct up to $25,000 in cash tips and up to $12,500 in overtime income per year.
These provisions expire in 2028 and only help if you earn enough to owe taxes in the first place.
“Policies like ‘no tax on tips’ or ‘no tax on overtime’ do not address the core problem facing millions of workers across the country, which is that wages are simply too low to begin with”, according to One Fair Wage founder Saru Jayaraman.
What You Must Know
The Real Problem: Program Cuts
The tax cuts aren’t where low-income families get hurt. It’s the benefit reductions.
SNAP (Food Stamps): The CBO estimates that removing internet costs from the benefits equation will cut SNAP benefits by an average of $10 per month for about 13 million households.
Starting January 1, 2026, able-bodied adults between ages 18 and 64 must now work or participate in school or a training program for at least 80 hours per month to remain eligible for SNAP.
Roughly 2.4 million people won’t be eligible for SNAP under new work requirements.
Medicaid: Beginning December 31, 2026, the OBBBA will require states to implement an 80-hour-per-month work requirement for low-income people ages 19 to 64 who receive Medicaid.
More than 10 million Americans are expected to be without health insurance by 2034 due to changes to Medicaid under the law.
💡 Pro Tip
The work requirements sound straightforward, but they function as paperwork barriers. Even if you qualify for an exemption, proving it requires navigating administrative red tape that causes many eligible people to lose benefits simply because they can’t complete the process in time.
Who Actually Benefits?
The richest 1% of Americans would receive an average tax cut of almost $65,000 in 2026, while people in the poorest 20% would receive a tax cut of just $110.
The richest 1% of Americans would receive a total of $121 billion in net tax cuts in 2026, while the middle 20% of taxpayers would receive less than half that much, $56 billion in tax cuts.
Even more stark: Foreign investors who own shares in U.S. companies would enjoy $22 billion in tax cuts compared to just $1 billion for the bottom 20% of Americans.
The Yale Budget Lab Analysis
Analysis from the Yale Budget Lab finds that once tax cuts are offset against program cuts, the bottom 40% of Americans are worse off, on average.
This is the key finding. Yes, your income taxes might drop $100. But if you lose $1,200 in benefits, you’re $1,100 worse off overall.
What to Do Next
Understand Your Eligibility
Review your current benefits before any changes take effect:
Check SNAP status – Verify if you meet new work requirements or qualify for exemptions
Review Medicaid – Determine if work requirements apply to you or if you’re exempt
Document everything – Keep proof of work hours, exemptions, or hardship circumstances
Maximize Available Tax Benefits
Even with limitations, some provisions might help:
Standard deduction increase – You automatically benefit if you don’t itemize
Child tax credit – Claim it if your income is high enough to qualify
Overtime and tips deductions – Use them if you earn this type of income and owe taxes
Prepare for Benefit Changes
States implement these changes on different timelines. Contact your state’s social services department to learn:
When work requirements start in your state
What documentation you’ll need to provide
Which exemptions you might qualify for
Who This Really Impacts
The disparities are striking across demographics.
25% of Black communities receive SNAP benefits and will be disproportionately affected by cuts.
For education, nearly 60% of Black students rely on Pell Grants, and the OBBBA places new limits on parents’ ability to borrow money to send their children to college.
Starting July 1, 2026, parent borrowers will be limited to borrowing $20,000/year and $65,000/lifetime per child, with elimination of affordable repayment options and loan forgiveness for parent borrowers who take out loans after this date.
FAQs About the Big Beautiful Bill and Low-Income Families
Q: Does the Big Beautiful Bill raise my income taxes?
No. Income tax rates stay the same, and the standard deduction actually increases. Most low-income families will see no change or a small decrease in income taxes.
Q: Then why do I keep hearing low-income families are worse off?
Because benefit cuts exceed any tax savings. The CBO estimates the poorest 10% lose about $1,200 per year from program restrictions while getting only minimal tax relief.
Q: Do the new work requirements for SNAP and Medicaid affect me?
If you’re an able-bodied adult ages 18-64 without young children or disabilities, yes. You’ll need to work or participate in approved programs for 80 hours per month.
Q: What about the child tax credit increase?
It went from $2,000 to $2,200 per child, but many low-income families don’t earn enough to benefit from the full credit since it’s not fully refundable.
Q: Are there any benefits in the bill for low-income workers?
The no-tax-on-tips and no-tax-on-overtime provisions might help some workers, but only if you earn enough to owe taxes. These provisions also expire in 2028.
Q: Where can I find official information about these changes?
The IRS maintains updated guidance at https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions with details on tax provisions.
Q: What should I do if I lose benefits due to work requirements?
Contact your state’s social services immediately to understand exemptions, hardship provisions, or appeal processes. Documentation is critical.
Disclaimer
The information in this article about the Big Beautiful Bill and its tax impact on low-income families is for general educational purposes only and does not constitute legal or tax advice. The tax provisions and benefit program changes under the One Big Beautiful Bill Act vary based on individual circumstances, income levels, state jurisdiction, and specific eligibility requirements. AllAboutLawyer.com does not provide tax preparation services, benefit counseling, or personalized financial consultations. Federal and state implementation of Big Beautiful Bill provisions, including SNAP work requirements, Medicaid eligibility changes, and tax credit calculations, are subject to ongoing regulatory guidance. For specific guidance on your tax liability, benefit eligibility, or questions about how the Big Beautiful Bill affects your household income, consult a qualified tax professional, contact your state’s social services department, or review official guidance from the IRS or Congressional Budget Office at CBO.gov.
For official Congressional Budget Office analysis of the Big Beautiful Bill’s distributional effects, visit https://www.cbo.gov for comprehensive reports on how tax and spending provisions affect different income groups.
Stay informed, stay protected. — AllAboutLawyer.com
This article provides general tax information only and is not legal or tax advice. Please consult a qualified tax professional or government resources for guidance on your specific situation.
Last Updated: January 28, 2026 — We keep this current with the latest legal developments
About the Author
Sarah Klein, JD, is a former consumer rights attorney who spent years helping clients with issues like unfair billing, product disputes, and debt collection practices. At All About Lawyer, she simplifies consumer protection laws so readers can defend their rights and resolve problems with confidence.
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