You’ve probably heard the rumors or seen the frantic headlines. Every few years, like clockwork, the banking lobby starts making noise about why credit unions shouldn’t get a "free ride" on taxes. When Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, 2025, the industry held its collective breath. Everyone wanted to know: was this the moment the credit union tax exemption finally hit the chopping block?
Honestly, the answer is a bit more complex than a simple yes or no, but the short version is that the exemption survived. Not just survived—it was basically used as a cornerstone of the new administration's "pro-consumer" narrative.
Why the Credit Union Tax Exemption Stayed Put
If you’re a credit union member, you can breathe easy for now. Despite massive pressure from the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA), the tax-exempt status remains intact under the current Trump administration.
The lobbying was intense. The "Don’t Tax My Credit Union" campaign, led by America’s Credit Unions, reportedly generated over 861,000 messages to Congress. That’s a lot of angry voters. In the end, the OBBBA (Public Law 119-21) reaffirmed the federal income-tax exemption for credit unions under IRC § 501(c)(1) and (c)(14)(A).
Why? Because credit unions are technically not-for-profit cooperatives. They don't have outside shareholders demanding dividends. Instead, they’re owned by people like you. When they don't have to pay a 21% corporate tax rate, they can (and usually do) offer lower loan rates and higher interest on savings. For an administration focused on "giving money back to the people," killing that exemption would have looked bad. Really bad.
The "Big Bank" Perspective
Banks hate this. They argue it’s an uneven playing field. Rob Nichols, the CEO of the ABA, has been pretty vocal about it, claiming that credit unions have evolved into "tax-exempt behemoths" that look and act just like banks.
They point to the fact that credit unions are now buying up tax-paying community banks at a record pace. In fact, by late 2025, we saw a flurry of these acquisitions, which only added fuel to the fire. The bankers’ argument is simple: if you walk like a bank and talk like a bank, you should pay taxes like a bank.
The Trump Twist: New Rules and "Trump Accounts"
While the core exemption stayed, the One Big Beautiful Bill Act didn't let credit unions off completely scot-free. There are new hoops to jump through.
For starters, there’s a new 1% excise tax on cash-based international remittances that kicked in on January 1, 2026. If you’re sending money abroad using cash or a cashier's check at a credit union, they have to withhold that 1% and send it to the Treasury. It’s a small dent, but it's a tax nonetheless.
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Then there’s the "Trump Account." This is a new tax-advantaged savings vehicle for kids born between 2025 and 2028. The government chips in a $1,000 seed deposit. Credit unions are being pushed to be the primary home for these accounts. It’s a clever move; it keeps the credit unions happy by giving them a steady stream of new, young members, while fulfilling a campaign promise.
The 10% Credit Card Cap Drama
We also have to talk about the Truth Social post that sent shockwaves through the industry in early 2026. President Trump suggested capping credit card interest rates at 10%.
Credit unions are currently panicking about this. Even with their tax-exempt status, many say they can't afford to offer cards at 10% without losing money. Jim Nussle, the head of America’s Credit Unions, recently warned that such a cap might actually hurt the very people it's supposed to help by making credit harder to get. It’s a classic "careful what you wish for" scenario.
What This Means for Your Wallet
If you’re wondering how credit union tax exemption Trump policies actually hit your bank account, here’s the breakdown:
- Better Rates: Because the exemption stayed, credit unions can still undercut big banks on auto loans and mortgages. On average, you’re looking at saving hundreds, if not thousands, over the life of a loan compared to a commercial bank.
- New Fees? Maybe: To cover the new 21% excise tax on executive compensation (for employees making over $1 million), some of the "mega" credit unions might look for ways to trim costs elsewhere.
- The "Fair Banking" Shield: A 2025 Executive Order focused on "debanking" means credit unions (and banks) are under more pressure to not close accounts for political or religious reasons. This is a big win for those who felt "canceled" by their financial institutions in the past.
The Bottom Line
The credit union tax exemption is safe... for now. But the "bank vs. credit union" war is reaching a boiling point. With the 119th Congress currently sitting, the banking lobby is still pushing for a "size limit"—the idea that once a credit union hits $1 billion or $10 billion in assets, they should lose their tax-exempt status.
Honestly, the "not-for-profit" label is getting harder to defend as credit unions get bigger and buy up stadiums. But as long as they can prove they’re returning that value to members through better rates, the political cost of taxing them is just too high for any administration.
Actionable Steps for Credit Union Members
If you want to make sure you're getting the most out of the current tax landscape, here is what you should actually do:
- Check your 2026 Remittance Fees: If you send money to family overseas, stop using cash. Use a U.S. bank account or debit card to fund the transfer so you avoid the new 1% excise tax.
- Look into Trump Accounts: If you have a child born in 2025 or later, open a "Trump Account" at your local credit union. The $1,000 federal seed money is essentially "free" capital, and the growth is tax-advantaged.
- Refinance Now: With the tax exemption secure, credit unions are currently in a "growth phase." They are aggressively competing for market share. If you have an auto loan at a big bank with a high rate, now is the time to see if a credit union will buy it out.
- Stay Vocal: The only reason the exemption survived the OBBBA was grassroots pressure. If you value your credit union, stay signed up for their advocacy alerts. The bankers aren't going to stop trying to tax them anytime soon.
The financial landscape in 2026 is messy, but the credit union "difference" is still very much a reality. Use it while you have it.