Budget Reconciliation Bill Passes the House, Advancing to Senate for Consideration

House Narrowly Passes 'One Big Beautiful Bill Act'; Senate Review Next

In a closely contested 215–214 vote, the U.S. House of Representatives approved the "One Big Beautiful Bill Act," a comprehensive tax and spending package central to President Donald Trump's second-term agenda. The legislation now proceeds to the Senate, where further debate and potential amendments are anticipated.

Key Provisions of the Bill

Tax Reforms:

• Extension of 2017 Tax Cuts: The bill seeks to make permanent the individual and corporate tax cuts introduced in the 2017 Tax Cuts and Jobs Act.

• New Tax Exemptions: Introduces exemptions for tips, overtime pay, and car loan interest.

• Standard Deduction Increases: Raises the standard deduction to $32,600 for joint filers, with additional temporary increases through 2028. The bill also includes a temporary $4,000 deduction for individuals aged 65 and older, phasing out for incomes above $75,000 ($150,000 for joint filers), available from 2025 through 2028.

• Child Tax Credit Enhancement: Increases the child tax credit to $2,500 per child through 2028, reverting to $2,000 thereafter.

• State and Local Tax (SALT) Deduction Cap: Raises the SALT deduction cap from $10,000 to $40,000 for households earning up to $500,000, with a phase-down for higher earners.

Spending Adjustments:

• Medicaid and SNAP Reforms: Imposes work requirements for Medicaid and Supplemental Nutrition Assistance Program (SNAP) beneficiaries, with the Congressional Budget Office estimating that up to 8.6 million individuals could lose Medicaid coverage by 2034.

• Energy Tax Credit Rollbacks: Accelerates the phase-out of green energy tax credits, ending certain credits by 2028 instead of the previously planned 2031.

• Defense and Border Security Funding: Allocates $150 billion in additional defense spending, including investments in unmanned systems, and provides $46.5 billion for border security measures.

Fiscal Impact:

The Congressional Budget Office projects that the legislation would increase the federal deficit by approximately $3.8 trillion over the next decade, raising concerns amid a national debt that has reached 124% of GDP. The bill’s passage has already sent ripples through financial markets, with bond yields climbing as investors price in the likelihood of higher government borrowing. This upward pressure on yields has contributed to volatility in equity markets, as investors reassess the long-term impact of fiscal stimulus on inflation, interest rates, and corporate earnings. As the bill advances through Congress, market participants are closely monitoring the Senate’s response for further clues on the policy trajectory.

Changes from the Original Draft

To secure sufficient support for passage, several modifications were made to the original draft of the bill:

• Medicaid Work Requirements: The implementation date for Medicaid work requirements was moved up from 2029 to December 2026.

• Energy Tax Credit Phase-Out: The phase-out of wind and solar energy tax credits was accelerated to end by 2028, rather than 2031.

• SALT Deduction Cap Adjustment: The SALT deduction cap was increased to $40,000, up from the initially proposed $30,000, to address concerns from representatives of high-tax states.

• Medicaid Funding Formula: States that have not expanded Medicaid under the Affordable Care Act, such as Florida and Texas, received a more favorable funding formula.

• Border Security Reimbursements: An allocation of $12 billion was included to reimburse border states for security costs incurred during the previous administration.

• Tax Provisions Adjustments: The proposed tax on remittances abroad was reduced from 5% to 3.5%, and certain taxes on multinational companies were slightly increased.

Additional Tax Changes in the Final House Bill

• Paid Family and Medical Leave Credit: Makes the employer credit for paid family and medical leave permanent.

• Adoption Credit: Makes up to $5,000 of the adoption credit refundable.

• Education Savings Expansion: Expands 529 plan eligibility to include expenses for elementary, secondary, and homeschool education, as well as certain postsecondary credentialing expenses.

• Charitable Contribution Deduction for Nonitemizers: Reinstates a deduction of up to $150 ($300 for joint filers) for certain charitable contributions made by taxpayers who do not itemize, available from 2025 through 2028.

• MAGA Accounts: Establishes tax-exempt "Money Accounts for Growth and Advancement" (MAGA) for children under 8, with annual contribution limits of $5,000, adjusted for inflation. Includes a one-time $1,000 Treasury contribution for eligible children born between 2025 and 2028.

• Bonus Depreciation: Extends 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, through 2029 (2030 for certain property).

• Research and Development Expenditures: Suspends the requirement to capitalize and amortize domestic R&D expenditures for tax years beginning after December 31, 2024, and before January 1, 2030.

• Interest Deduction Limitation: Reinstates the EBITDA-based limitation for interest deductions under Section 163(j) for tax years beginning after December 31, 2024, and before January 1, 2030.The Tax Adviser

• Reporting Thresholds: Increases the Form 1099-K reporting threshold to $20,000 and 200 transactions and raises the general Form 1099 reporting threshold to $2,000, both adjusted for inflation after 2026.

Next Steps in the Senate

The bill now advances to the Senate, where Republicans hold a 53–47 majority. While the reconciliation process allows for passage with a simple majority, some Senate Republicans have expressed reservations about the bill's fiscal implications and specific provisions. Senate Majority Leader John Thune indicated that the Senate may make significant changes to the bill before a final vote. The goal is to have the legislation signed into law by Independence Day, July 4.

Understanding the GOP’s “One Big Beautiful Bill”: What It Means for Individual Taxpayers

On May 12, 2025, House Republicans introduced a comprehensive tax and spending proposal known as the “The One Big Beautiful Bill.” This legislation aims to make permanent several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) and introduces several new tax measures that could impact individual taxpayers.  

Preliminary analysis by the nonpartisan group, The Tax Foundation, finds that over the long haul, the bill, as currently written, would increase long-run GDP by 0.6 percent and reduce federal tax revenues by $4.1 trillion over the next 10 years. Factoring in economic growth over the same period, the revenue reduction would come in closer to $3.3 trillion. The House passed budget resolution would allow for a $4.5 trillion deficit increase over the next decade as long as spending is cut by $1.7 trillion. The bill is likely to face challenges as it moves through the House Ways and Means Committee, but the current version of the bill gives us some insight as we begin creating tax plans for 2025 and into the future.

Below we will take a closer look at some of the key individual provisions of the bill and the impact they might have on certain taxpayers.

Key Takeaways for Individual Taxpayers

• Permanent Extension of 2017 Tax Cuts: The bill seeks to make the individual income tax rates and brackets from the TCJA permanent, increasing the inflation adjustment for all brackets except the 37 percent bracket.

• Permanent Extension of Standard Deduction and Elimination of the Personal Exemption: The standard deduction would also be temporarily increased by $2,000 for joint filers, $1,500 for head of household filers, and $1,000 for all other filers from 2025 to the end of 2028.

• Temporary Expansion of the Child Tax Credit: The child tax credit would temporarily be increased to $2,500 from 2025 to 2028 reverting to $2,000 thereafter, adjusted for inflation.

• New Deductions for Workers: The bill aims to temporarily allow certain classes of taxpayers to deduct tip income and overtime pay. The proposed deductions would apply for tax years 2025 to 2028 and would not be available to highly compensated employees.

• Senior Citizen Benefits: An additional $4,000 standard deduction would be available for seniors from 2025 to 2028, with phaseouts to the additional deduction beginning at $75,000 for single filers and $150,000 for joint filers.  

• State and Local Tax (SALT) Deduction Cap Adjustment: The cap on SALT deductions would be permanently raised from $10,000 to $30,000 for single filers earning under $200,000 and married filers earning under $400,000.

• Permanent Limitation on Certain Itemized Deductions and Auto Loan Deduction: The limitation on personal casualty losses and wagering losses would be made permanent and certain moving expenses would be permanently terminated. Auto loan interest on autos with final assembly in the U.S. would temporarily be deductible for both itemizers and non-itemizers for tax years 2025 to 2028. The deduction would be capped at $10,000 and phases out by $200 for every $1,000 of income above $100,000 for single filers and $200,000 for joint filers.

• Overall Itemized Deduction Limitation: the total value of itemized would be limited to 35 cents on the dollar. This would impact the highest earners in the top marginal income tax rate of 37 percent

• Elimination of Certain Tax Credits: The bill proposes phasing out or eliminating various clean energy tax credits after 2025, specifically those for energy-efficient home improvements and electric vehicles. The bill also takes a new approach at crippling the Affordable Care Act by tightening claims for premium tax credits (PTC) and repealing the limit on repayments of credits received in advance throughout the year in the form of premium subsidies.

Additional Considerations

• Deficit Implications: Analysts estimate that the major tax provisions of the bill could lead to a 0.6 percent expansion of the long-run economy. However,  they also estimate an addition of approximately $3.3 trillion to the federal deficit over the next decade. These estimates raise concerns about long-term fiscal sustainability as the deficit increase would require the U.S. government to borrow more. As interest payments on debt to foreigners increase, American incomes decrease.

• Temporary Provisions: While many tax cuts are made permanent, some new deductions and credits are set to expire after a few years, introducing potential uncertainty for future tax planning.

Final Thoughts

The “One Big Beautiful Bill” presents a significant overhaul of the current tax system, with various provisions that could affect individual taxpayers differently based on their income levels, family situations, and geographic locations. Taxpayers are encouraged to consult with a CPA or tax professional to understand how these proposed changes may impact their personal financial situations.

If you have questions about how these proposed changes could affect you or would like personalized guidance, don’t hesitate to reach out to Platform 3 — we're here to help you navigate what’s next.