Major Developments in the Republican Tax Bill (May 12, 2024 – June 11, 2025)

The proposed Republican tax bill often referred to as the “One Big Beautiful Bill” has advanced significantly, with the House passing the legislation in late May 2025. The bill is now awaiting Senate consideration and possible modification before it could become law.

The House narrowly passed the bill (215-214), marking a major legislative win for President Trump and House Republicans. The bill still faces a contentious path in the Senate, where further amendments are possible before final passage. Below are some key updates and new provisions.

Individual Tax Changes

Permanent Lower Tax Rates: The bill aims at making the 2017 TCJA individual tax rates permanent, preventing them from expiring at the end of 2025.

Standard Deduction Increases: The standard deduction is increased by $1,000 for single filers and $2,000 for married couples from 2025 through 2028.

Child Tax Credit: The child tax credit is temporarily raised to $2,500 per child through 2028, after which it returns to $2,000 and is indexed for inflation.

No Taxes on Tips and Overtime: Fulfilling a Trump campaign pledge, the bill eliminates federal taxes on tips and overtime pay earned between 2025 and 2028.

Car Loan Interest Deduction: Interest on car loans is deductible through 2028, but only for vehicles manufactured in the U.S.

Estate Tax Exemption: The exemption rises to $15 million for individuals and $30 million for married couples, indexed for inflation.

Alternative Minimum Tax (AMT): The higher AMT exemption amounts from the TCJA are made permanent, preventing more taxpayers from being subject to the AMT after 2025.

Mortgage Interest Deduction: The $750,000 cap on mortgage interest deduction is made permanent, rather than reverting to the pre TCJA $1 million cap.

State and Local Tax (SALT) Deduction

The SALT deduction cap is increased to $40,000 for married couples earning up to $500,000, with a phase down for higher incomes. This change addresses concerns from lawmakers in high tax states and remains a contentious issue.

Senior and Social Security-Related Deductions

While the bill does not fully eliminate taxes on Social Security benefits, it temporarily increases the standard deduction for those aged 65 and older by $4,000 from 2025 through 2028, with phase outs for higher income seniors.

Business Tax Changes

Pass-Through Deduction: The 20% deduction for qualified business income from pass through entities is increased to 23% and made permanent.

Immediate Expensing of R&D: Temporarily expensing 100% of R&D costs for tax years 2025-2029

Bonus Depreciation: The bill reinstates 100% bonus depreciation for 2025-2029.

Corporate Tax Rate: The bill does not change the corporate tax rate or capital gains rate despite earlier speculation.

Other Notable Provisions

Work Requirements for Federal Benefits: The bill adds new work requirements for Medicaid and food stamps, requiring adults without dependents to work a minimum number of hours and to recertify eligibility more frequently.

Debt Ceiling Increase: The bill also raises the national debt ceiling by $4 trillion to accommodate increased spending and tax cuts.

Clean Energy Tax Credits: The bill accelerates the phase out of many clean energy tax credits added by the Inflation Reduction Act and eliminates the $7,500 electric vehicle credit.

Fiscal and Economic Impact

The bill is projected to increase the 10 year budget deficit by $2.6 trillion to $4 trillion, depending on the analysis. Some temporary provisions, such as those for the child tax credit and deductions on tips and overtime, are set to expire by 2028, potentially creating another “tax cliff” like the one currently being addressed.

Next Steps

The bill now moves to the Senate, where it may be approved as is or amended. If amended, it will require another House vote. The timeline for Senate action is expected to be before the July 4th recess, but contentious debates and potential changes remain likely.

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