Yesterday the Senate Finance Committee released their proposed tax changes to include in the reconciliation bill (aka the One Big, Beautiful Bill Act). Many of these provisions are similar to those that were passed by the House. However, there are some substantial differences, as outlined below.
At this stage it is unclear which version may make it across the finish line or when (if at all). We will continue to provide updates as these developments unfold.
Key differences from the House bill that are contained in the Senate version that would have the greatest impact on our clients include:
- An additional $1,000 ($1,500 HOH and $2,000 MFJ) increase in the standard deduction and a $6,000 deduction for seniors (rather than the $4,000 senior bonus deduction in the House bill);
- The SALT limitation would remain at $10,000 and be made permanent (rather than the $40,000 limitation contained in the House bill), although similar to the House bill there would be limitations on how passthrough entity elective taxes are treated;
- The Child Tax Credit would be increased to $2,200 beginning with 2025 tax year (increased from the $2,000 CTC adopted by the TCJA) and increased for inflation thereafter. The House version would make the TCJA inflation-adjusted $2,000 credit permanent, but would also increase the credit further to $2,500 for the 2025 through 2028 tax years;
- The IRC §199A qualified business income deduction would be made permanent, but would retain the current 20% deduction cap rather than increase it to 23%, and a minimum deduction would apply to small businesses;
- The No Tax on Tips deduction would be capped at $25,000 per individual, No Tax on Overtime would be capped at $12,500 ($25,000 MFJ), and both would begin to phase out at $150,000 ($300,000, MFJ);
- The 100% bonus depreciation deduction, IRC §174 current expensing for domestic research activities, and decreased business interest limitations would be made permanent, rather than temporary as in the House bill, but retroactive provisions would apply for the IRC §174 current expense deduction for certain taxpayers;
- The dependent care assistance exclusion would increase from $5,000 to $7,500 beginning with the 2026 tax year and the Child and Dependent Care Tax Credit would increase from a maximum 35% to 50%;
- Nonitemizers would be able to claim charitable deductions of up to $1,000 ($2,000 MFJ) rather than the $300/$600 cap in the House bill, but the deduction would be subject to additional limits for both individuals and corporations;
- The Senate bill does not contain many of the health savings account expansion provisions contained in the House bill;
- The qualified small business stock gain exclusion would be revised; and
- Different repeal dates would apply to the various clean vehicle and clean energy credits and deductions.
The draft language from the Senate Finance Committee is available at:
www.finance.senate.gov/imo/media/doc/finance_committee_legislative_text_title_vii.pdf
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