No more 'fire-breathing dragons'? Biden agrees to slash IRS funding by $21B as part of debt limit deal — here's how the tax agency plans to cope

But the bill to put the brakes on the debt limit until January 2025 — which was signed into law two days before the deadline — comes with plenty of caveats and cuts to spending. Here’s what some of those changes cover — and most importantly, what's getting clawed back.

Spending cuts, the student loan freeze and more

The bipartisan bill reduces discretionary spending for the 2024 fiscal year and caps it to 1% growth in 2025, which White House officials told reporters could “likely” save around $1 trillion over the next decade.

It also adds new work requirements for adults aged 50 to 54 who don’t have children living with them to qualify for the Supplemental Nutrition Assistance Program (SNAP). The current law only imposes these limits on adults aged 18 to 49, although the bill will exempt veterans, people without housing and young adults 24 and under who are transitioning out of the foster care system.

As for proposed clean energy projects, a lead agency will be created to oversee reviews and ensure they’re completed within one to two years.

About $30 billion in unspent funds from a previous COVID-19 relief bill has also been clawed back, with some of the money diverted to nondefense discretionary spending.

The legislation also ensures that the student loan payment freeze will end in August and restricts Biden’s ability to reinstate it. That means, come September, student loan payments (and interest charges) will resume.

There’s a major pull-back on IRS funding

To pay for the debt deal, Biden has had to go back on some of his spending plans — especially when it comes to the federal tax agency. The deal rescinds $1.38 billion and another $20 billion of IRS funding from the Inflation Reduction Act will be put toward nondefense programs.

Last year, Biden announced he’d be increasing funding to the IRS, which has been woefully underfunded and understaffed for a decade.