The “Big Beautiful Bill” Makes (Some) Progress in the Senate

By Stanley Rose June 20, 2025

Introduction and status

On May 22, 2025, after an overnight marathon session, the U.S. House of Representatives passed (by one vote) H.R. 1, which is self-titled as the “One Big Beautiful Bill Act.” It then advanced to the Senate, where, as expected, many proposed changes were made and shared with the public on June 16 by the Senate Finance Committee. It contains significant changes to the U.S. tax code and promises to set in motion many items from President Trump’s campaign agenda. It includes extensions and modifications of many features in the Tax Cuts and Jobs Act, which was one of the biggest pieces of tax legislation in decades – passed during Trump’s first stint in the Oval Office.

The Senate’s version of the bill is more than 500 pages long. Due to its length, and the fact that this legislation is likely nowhere near the finish line (discussed below), this article makes no attempt to cover each feature. It will provide an overview of the some of the proposed legislation’s current specs.

Let’s first note that while tax advisors, their clients, and other citizens whose pocketbooks will be impacted by this very significant tax legislation may be very interested in its impact, we should not become too hung up on its current features. This bill is still very much a moving target. Features can be tweaked, added, or dropped at numerous steps along its way before the end result becomes law. Also, its path may not be linear at all: Like the children’s game Candyland, there are numerous checkpoints in its path where the bill can be pulled out of its forward progress and rerouted back to repeat an earlier step.

Even if we assume it takes the shortest path, it needs to navigate:

1. potential/likely further changes by divisions in the Senate,
2. review by the Parliamentarian of the Senate (this is designed to ensure that it complies with strict rules necessary to allow it to continue to progress using the so-called “reconciliation” process – a method that both parties have used in recent years to advance legislation using a simple majority rather than a 2/3 majority. In part, the rules require close connection to fiscal activity, rather than general laws),
3. voting by the full Senate,
4. voting by the House (necessary because the bill changed since the House last saw it, and to advance, the House and Senate must agree on the exact language), and
5. signature by the President.

It is likely that between steps 2 and 3 above, a smaller group of lawmakers from both chambers will work together hoping to ensure that the iteration sent back to the House by the Senate will be approved, rather than undergo more changes and additional volleys.

Content of “Big Beautiful Bill”

The version sent by the House to the Senate a couple weeks ago was covered in an article penned recently by BNN’s Adam Aucoin, and its impact on tax-exempt entities was discussed in one authored by Nick Porto.

This article will address a number of features as it stands now, tentatively proposed by the Senate. In some cases, the discussion below will compare it to the House’s version. In many more cases, you will note references to 2017’s Tax Cuts and Jobs Act (“TCJA”) because (1) that legislation had very broad reach and (2) many of its characteristics are scheduled to “sunset” within the next year or so unless action now is taken to extend them, and much of the current legislation does just that. The sunsetting occurs because the TCJA, like the current legislation, went through the reconciliation path, and one of its requirements is that the law cannot disrupt the budget for more than 10 years. (This explains why so many tax-related laws were set in motion with an expiration date of 10 years or less.)

Individual tax features

Individual income tax rates: Before TCJA, there were seven brackets ranging from 10% to 39.6%. TCJA also deployed seven brackets, but while they, too, start at 10%, they top out at 37%, and the brackets in the middle generally provide lower rates for larger swaths of income. The rates will revert back to pre-TCJA levels unless action is taken. Although the Senate version tweaks it with some inflation adjustments, the Senate and House are closely aligned in that they propose making the tax brackets set in motion by the TCJA permanent.

Individual standard deductions: The TCJA greatly increased standard deductions, but only temporarily. That, combined with the SALT cap (discussed later) allowed many filers to forgo using detailed itemized deductions and opt instead for the fixed-amount standard deduction (taxpayers can choose between the larger of the two amounts). The House and Senate proposals would make these changes permanent.

Exemptions: The TCJA eliminated personal exemptions, again temporarily. Both chambers would make this change permanent but throw a bone to those aged 65 and older, with the House proposing a $4,000 “senior bonus” and the Senate proposing $6,000. This deduction would phase out at certain income levels and expire completely after 2028.

Child tax credit: This credit allows parents a $2,000 credit for children under the age of 17 and an additional credit of $500 for certain other dependents. The Senate bill increases the $2,000 credit to $2,200, makes the $500 additional credit and phaseouts of the credit (based on income) permanent.

SALT cap: The TCJA created a cap of $10,000 on the amount of state and local taxes that can be included as an itemized deduction on an individual’s income tax return. In the years since its implementation, many states created methods by which business owners can deduct similar taxes at the entity level, thereby defanging this restriction. The House bill would crank the cap up to $40,000 but shut down many of the end-runs created by the states.  The Senate version retains the $10,000 cap and implements even more changes to prevent taxpayers from avoiding the cap.

Observation: What a contentious mess this is! The SALT cap has proven one of the most polarizing tax features in recent memory, and this undoubtedly will be the subject of more negotiations. Taxpayers hit the hardest by the SALT cap are those in high-tax states like New Jersey, New York, and California. Because their state taxes are high, their itemized deductions were too before the SALT cap. This limitation drives up their federal taxes more than those residing in more tax-friendly states because the removal of most of their state tax leaves a bigger hole in their deductions and creates a corresponding increase in their taxable incomes. Federal lawmakers from high-tax states generally tend to be opposed to allowing large deductions for high earners. But with the SALT cap disproportionately affecting their residents, they find themselves opposed to this cap, or at least a cap as low as its current level. Federal lawmakers from low-tax states don’t mind this cap as much, because it impacts far fewer of their constituents. The upshot is that both parties are placed in an unfamiliar position, opposite their usual positions (but of course opposite, as usual, from the other party). Few things highlight the inability of our lawmakers to meet in the middle and compromise better than the SALT cap.

Casualty loss deduction: The TCJA temporarily narrowed a deduction applicable to casualty losses (damage to property, commonly experienced during storms or other natural disasters) to include only those for which the federal government declared a national disaster. The Senate wants to make this change permanent, but also expand it to include disasters declared by states.

Mortgage interest: Historically, mortgage interest associated with debt incurred to acquire a qualified residence has been allowed as an itemized deduction, but only on the first $1,000,000 of such debt. Home equity debt (loans for which the home is collateral, but proceeds were spent on something else, like buying a snowmobile or paying for a vacation) was also deductible, subject to a different, much lower cap. The TCJA temporarily dropped the $1,000,000 debt cap related to mortgage interest down to $750,000 and eliminated the interest deduction related to home equity loans. Like the House, the Senate bill makes the $750,000 cap permanent, and it retains the elimination of home equity loan interest.

Auto loan interest: For a 4-year period beginning in 2025, the Senate proposes a new deduction for interest paid on qualifying personal vehicle acquisitions. The deduction is capped at $10,000 and is phased out based on income, with the phaseout beginning at income of $100,000 (or $200,000 for joint filers).

Miscellaneous itemized deductions: The TCJA temporarily suspended the use of a long list of itemized deductions that provided benefits only to the extent that their amounts collectively exceeded a threshold based on income. The Senate’s proposal would make the suspension permanent but would create an exception for certain expenses incurred by teachers.

Charitable contributions: The House bill proposes reinstatement of a charitable contribution deduction for those who do not itemize deductions, equal to $150 or $300, depending on filing status. The Senate raises the amount to $1,000 or $2,000, but also creates a floor by lopping off the bottom 0.5% of the contributions.

AMT exemption: The TCJA increased an exemption that had the effect of reducing the number of taxpayers subject to the Alternative Minimum Tax (“AMT”). It did so temporarily, but the House and Senate versions make that change permanent.

Qualified Business Income deduction (“QBI”): Created by the TCJA, the QBI deduction is equal to 20% of certain pass-through income earned by owners of S-corporations, partnerships, and LLCs. It is subject to numerous, complex limitations and is scheduled to expire after this year. The House version of the current bill would make QBI permanent and raise it to 23%. The Senate version also makes it permanent but keeps it at 20% and adds further complexity to some of the limitations. It also creates a flat minimum deduction of $400 for certain taxpayers who are active in the business that gives rise to the deduction.

Gift and estate tax exemption: The TCJA greatly increased the amount a person can give away during life or at death without incurring an estate or gift tax. The cap was indexed for inflation and currently sits at $13.99 million but is scheduled to expire at the end of 2025. Similar to the House’s plans, the Senate’s proposal makes the increase and the inflation indexing permanent, and also resets the exemption upward to $15 million for 2026.

Child care credit: House and Senate bills propose enhanced credits for the cost of child care. The Senate version allows a credit of 50% of the cost of care, reduced to lower percentages of 35% or 20% based on various levels of income.

Tax-free tips and overtime pay: The House and Senate offer new tax breaks that would eliminate federal income taxes on the first $25,000 of qualified tips and the first $12,500 ($25,000 for joint filers) of overtime pay. Both would be accomplished via deductions available to those who use itemized deductions or standard deductions, and both would be phased out at certain income levels.

Savings accounts for children: What started in the House described as “MAGA accounts” has emerged from the Senate humbly named the “Trump account.” This new feature would allow parents to contribute $5,000 a year to an account that will grow in a tax-deferred manner until their child withdraws it for a qualifying expense after turning age 18. Qualifying expenses include education, down payment on a first home, or funding of a new business. Any growth in the account will be taxed at reduced capital gain rates if used for qualifying expenses but will be taxed at ordinary rates if used for any other purpose. To encourage use of the accounts, the government will deposit (although parents can opt out) the first $1,000 from Treasury coffers for any child born between January 1, 2024, and December 31, 2028. To qualify for this “baby bonus,” a child must be a U.S. citizen and have a valid Social Security Number.

Business tax features

Section 179 write-off: Currently taxpayers may expense up to $1.25 million of qualifying assets placed in service each year, with that benefit beginning to phase out for taxpayers placing assets of $3.13 million in service in that year. The Senate bill would increase these amounts to $2.5 million and $4 million, respectively.

Bonus depreciation: Modifying the House proposal somewhat, the Senate would permanently reinstate the full (100%) bonus depreciation deduction beginning (oddly) with assets placed in service January 19, 2025. Without new action, a current phaseout schedule is in place, with 2025 additions qualifying for a 40% deduction, followed by 20% in 2026 before going kerflooey in 2027.

Special depreciation for Qualified Production Property: This entirely new deduction envisioned by the House and Senate versions will allow immediate 100% deduction of the costs of building or buying commercial real property in the U.S. that is used for manufacturing, agriculture, chemicals, or refineries.

Business interest deduction: The TCJA imposed a limit on the amount of business-related interest that can be deducted each year. Greatly oversimplifying an insanely complex and steaming pile of rules, it caps the interest at 30% of Adjusted Taxable Income (“ATI”). For the first few years of its life, taxpayers could add back depreciation and amortization to their regular income to arrive at ATI. This had the effect of producing a larger threshold and a larger deduction. But pursuant to TCJA rules, the depreciation and amortization addback ceased in 2022, resulting in smaller deductions. The Senate’s proposed lifeline reinstates that addback beginning with 2025.

R&D costs: For decades, a credit has existed related to increasing research and development costs to supplement the current deduction allowed for most of those costs, but the credit was inexplicably treated as Congress’ hacky sack, being allowed to expire before being reinstated on an annual basis, often retroactively, requiring taxpayers to amend prior year returns to obtain any benefit from it. That insanity ended in 2015 when the R&D credit finally was made permanent. But any celebration was short-lived, because in 2017 the TCJA kneecapped research costs again, but differently. The credit remained, but the TCJA forced all research costs to be capitalized rather than deducted, whether or not the credit was utilized on a portion of those costs. The capitalized costs could then be amortized over 5 years for domestic costs or 15 years for foreign costs. The current Senate bill would make several major changes: (1) Domestic costs beginning in 2025 will become currently deductible (but costs incurred outside the U.S. would remain subject to capitalization). (2) All taxpayers may elect to expedite amortization of previously capitalized domestic costs, using a 1 or 2 year period instead of whatever remained of the 5 year period otherwise in place. (3) “Small” taxpayers with revenues of $31 million or less can apply the new ability to immediately deduct domestic costs retroactively, essentially undoing the previous capitalization.

Qualified Opportunity Zones: Under some rather complex rules, taxpayers investing in economically distressed areas can sidestep paying tax on capital gains, but only if they hold that investment for long enough (generally 10 years). This benefit is scheduled to expire after next year, but the Senate bill would make it permanent (and of course roll out a number of changes and additional rules).

Energy related features

A number of energy–related credits currently exist, some with various expiration dates several years in the future. Both the House and Senate versions of the bill plan to ax those benefits, primarily by significantly accelerating the expiration dates. Credits on the chopping block include the Residential Clean Energy Credit, which allows a tax credit as high as 30% of qualifying residential expenditures made for heat pumps, solar water-heating or electricity-generating property, and wind energy property. These credits are scheduled to last through 2032, but the Senate bill will kill them off within 180 days of the law’s enactment. (Many contractors are booked well beyond that time frame, so this concession will be of little use to many homeowners, even if they begin to act now!) Another tax break provides a $2,500 credit for new energy-efficient homes that meet certain specifications. The credit is scheduled to expire after 2032, but the Senate bill would end it after 12 months from the date of the law’s enactment. Certain wind and solar projects currently qualify for investment tax credits, and although the House version was more stingy, the Senate bill would still reduce the percentages of those credits beginning in 2026, and eliminate them beginning with 2028.

International features

The international tax features in the Senate proposal are complex enough that they warrant their own discussion, which we plan to provide soon, although potentially after we see what comes out the other side of the full Senate’s consideration (rather than just the Finance Committee, which produced the current bill language). The current proposal calls for many changes, including adjustments to the foreign tax credit computation, rewired rates and rules related to foreign-derived intangible income (“FDII”) and global intangible low-tax income (“GILTI”), and adjustments to the base-erosion and anti-abuse tax (“BEAT”). It also would continue with the House’s efforts to punish those associated with countries that impose what it describes as “unfair foreign taxes.”

Conclusion

The so-called “Big Beautiful Bill” easily is the most significant tax legislation since 2017’s Tax Cuts and Jobs Act. Unlike some absurd predictions weeks ago that the House bill would sail through the upper chamber and arrive giftwrapped, awaiting the president’s pen, the Senate version already looks, at best, like a funhouse mirror version of what the House produced, and it does not appear that the Senate version (at the time of this article’s publication) is ready to be returned to the House. The odds are good that (1) we haven’t seen all the features that this legislation will hold by the time it is done, and (2) we also will see some current provisions drop off, strengthened, or neutered.

When meaningful developments occur, we’ll update you again.

For more information, please contact Stanley Rose or your BNN tax advisor at 800.244.7444.