UPDATE: the bill has passed in the House. We will send a full analysis early next week.
By now you’ve likely heard about the One, Big, Beautiful Bill. The United States Senate passed its proposed version of the bill earlier this week. The budget bill is now back with the United States House of Representatives for a final vote.
Both the House and Senate proposed bills include some new and updated tax breaks. Here are a few of the potential tax legislation highlights:
1) Extended Tax Cuts & Jobs Act (TCJA) Tax Rates
Enacted in 2017, the TCJA lowered taxes for corporations and individuals across most income brackets. Many provisions of the TCJA are set to expire on December 31, 2025, but the new bill aims to make those tax rates permanent. The Senate bill also permanently extends a larger standard deduction and modified alternative minimum tax threshold.
2) SALT Deduction Limit
The current SALT deduction limit is set at $10,000 by the TCJA and will expire at the end of this year. The Senate’s approved bill raises the limit from $10,000 to $40,000. After five years, however, the cap would return to $10,000. The House-approved provision, however, offers the higher limit for an extended window of time.
3) Child Tax Credit (CTC)
In the House’s version of the bill, the CTC would permanently increase to $2,500 per child for tax years 2025 through 2028 with the current higher income phaseout thresholds. After tax year 2028, the CTC would return to $2,000 and be adjusted annually for inflation. The Senate’s version of the bill permanently increases the CTC to $2,200 with potential annual inflation increases.
4) U.S.-Assembled Cars Auto Loan Interest Deduction
The Senate’s proposed bill allows an interest deduction on auto loans of U.S.-assembled cars up to $10,000 per year with income phase outs starting at $100,000/$200,000. This provision does not appear in the House’s proposed legislation.
5) Qualified Business Income (QBI) Deduction
Under the TCJA, eligible business owners may deduct up to 20% of their QBI, although this provision is set to expire after 2025. The House version of the bill would increase the deduction to 23% and make it permanent. The Senate version retains the current 20% deduction and also makes it permanent.
6) Bonus Depreciation
The Senate version of the bill permanently establishes a 100% bonus depreciation applied to qualified property acquired and placed in service after January 19, 2025.
7) Research & Development (R&D) Expensing
Proposed legislation makes R&D expensing permanent and restores amortization in interest limitation rules. The new bill would once again allow businesses to write off the cost of research and development in the year it was incurred.
8) Estate and Gift Tax Exemption
Both the Senate and House proposed bills are in alignment with raising the estate and gift tax exemption to $15M per individual by 2026.
9) Charitable Deduction for Non-Itemizers
The Senate proposes a permanent charitable deduction on the front of the return for non-itemizers capped at $1,000 for individuals and $2,000 for joint filers. The House version proposes a reduced charitable deduction for non-itemizers capped at $150 for individuals and $300 for joint filers, sunsetting at the end of 2028.
10) Tips
Both House and Senate bills contain proposed legislation to exempt tips and overtime from income tax for eligible taxpayers.
11) Social Security Tax
The elimination of tax on Social Security benefits isn’t included in either version of the proposed bill. However, the Senate bill temporarily provides a $6,000 deduction for years 2025 through 2028 for individuals age 65 and older for those with modified adjusted gross income under $75,000 ($150,000 for joint filers). The House bill expands the standard deduction for seniors, but caps it at $4,000.
It’s currently uncertain if the House will pass the bill by the July 4th deadline, but we’ll keep you updated on all the final provisions once it does. Feel free to contact the Cg Team with any questions.