On May 22, 2025, the U.S. House of Representatives passed the “One Big Beautiful Bill Act” (H.R.1), a sweeping proposal to extend or modify several tax provisions originally enacted under the 2017 Tax Cuts and Jobs Act (TCJA), many of which are set to expire at the end of 2025.
Below, we break down 12 key proposed changes compared to current law:
1. Individual Income Tax Rates
- Current: TCJA rates (10%–37%) expire after 2025
- Proposed: Makes TCJA brackets permanent, avoiding reversion to 39.6% – avoiding automatic tax hike for individuals and high earners.
2. Standard Deduction
- Current: Doubled under TCJA through 2025
- Proposed: Makes increase permanent; adds a temporary $1,000–$2,000 boost (2025–2028)
3. Child Tax Credit
- Current: $2,000 per child, partially refundable
- Proposed: Increases to $2,500 (2025–2028), then $2,000 (indexed); refundable portion rises to $1,700
4. Alternative Minimum Tax (AMT)
- Current: Higher exemption through 2025
- Proposed: Permanently extends higher TCJA-level exemption amounts.
5. Estate & Gift Tax
- Current: ~$13.6M exemption in 2025, reverts to ~$7M in 2026
- Proposed: Raises exemption to $15M per person ($30M per couple) permanently, indexed for inflation.
6. SALT Deduction Cap
- Current: $10,000 cap through 2025; unlimited deduction returns in 2026.
- Proposed: Raises cap to $40,000 for income under $500K; remains $10,000 above that; cap is permanent and indexed.
7. Tips & Overtime Tax Relief
- Current: Fully taxable as wage income.
- Proposed: Temporarily (2025–2028) exempts qualified tips and overtime pay from income tax for earners under ~$160K.
8. Car Loan Interest Deduction
- Current : No deduction for personal auto loan interest.
- Proposed: Temporary above-the-line deduction (2025–2028) of up to $10K interest for income under $200K joint/$100K single.
9. Pass-Through Deduction (Section 199A)
- Current : 20% deduction through 2025; scheduled to expire.
- Proposed: Makes deduction permanent; increases to 23%; retains phase-out for high-income service businesses.
10. Bonus Depreciation
- Current: 40% in 2025; phased out by 2027.
- Proposed: Restores 100% bonus depreciation from mid-2025 through 2029.
11. R&D Deduction
- Current : Amortization over 5 years (15 for foreign R&D) since 2022.
- Proposed: Allows immediate expensing of domestic R&D costs through 2029.
12. Business Interest Deduction (163(j))
- Current: Limited to 30% of EBIT (stricter standard).
- Proposed: Reverts to 30% of EBITDA for 2025–2029, allowing greater interest deductions.
Summary & Next Steps
This bill represents the most significant tax legislation since 2017. It aims to cement TCJA-era reforms, provide temporary taxpayer relief, and support business investment.
If you’re a high-income earner, own a pass-through, manage real estate, or invest in R&D, this proposal could significantly impact your planning. Walter Shuffain will continue to monitor legislative progress and provide updates.
Let us know if you’d like help evaluating how these changes might affect you.