Good morning & happy Monday!
“What’s the difference between a taxidermist and a tax collector? The taxidermist only takes your skin.”
– Mark Twain
Today I would like to provide a concise update on the tax package currently being worked on in Washington D.C.
As I’ve mentioned before, the current tax law expires at the end of this year. So, this is important legislation that is critical to address. If a new tax bill is not passed by the end of the year, then we automatically revert back to the tax brackets from 2017, which were higher brackets at every income level.
The “One Big Beautiful Bill,” as President Trump likes to refer to it as, is a comprehensive tax and spending package and it passed the U.S. House on May 22, 2025, by a vote of 215 to 214. Every Democrat and 2 Republicans voted against the bill with 2 other Republicans voting “present.’ Needless to say, it passed the House by the slimmest of margins and in a very partisan fashion.
The primary objective of this tax package is to make permanent the key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introduce new tax benefits. Many previous tax bills had expiration dates associated with them (such as 2001 & 2016), so it would be nice if we can get clear tax guidance going forward without a pending expiration date.
As with almost everything in Washington, there are a lot of steps left to go before getting this bill to the finish line, but here’s some of the main components of the House passed bill:
- TCJA Extension: The bill permanently extends TCJA provisions, including current individual income tax rates, the increased standard deduction, and the qualified business income (QBI) deduction.
- New Tax Breaks: Temporary exemptions for overtime pay, car-loan interest, and tips are proposed, along with a $4,000 deduction for seniors (instead of Social Security benefit exemptions).
- SALT Deduction: The state and local tax (SALT) deduction cap would increase from $10,000 to $30,000 for taxpayers earning $400,000 or less, benefiting those in high-tax states.
- Child Tax Credit & MAGA Accounts: The Child Tax Credit is enhanced, and new “MAGA” accounts offer a $1,000 government contribution for children born between 2025–2028, with up to $5,000 annual contributions until age 18.
- Business Provisions: The bill reinstates 100% bonus depreciation (2025–2029), restores favorable business interest deductions, and allows immediate expensing for domestic R&D and certain manufacturing assets.
- Revenue Measures: To offset costs, the bill raises taxes on endowments, executive compensation, and private foundations, limits itemized deductions for high earners and imposes a 5% tax on foreign remittances.
- Tariffs: New tariffs, that went into effect in April 2025, will affect over 70% of U.S. imports, potentially increasing household costs by ~$1,200 in 2025 but generating significant federal revenue.
- Economic Impact: The Tax Foundation estimates a 0.6% GDP increase but a $4.0 trillion revenue reduction over 2025–2034. Basically, it likely helps the economy but adds to the U.S. debt.
So, what happens next?
The bill now goes to the Senate where they will debate and vote on their own version of the bill. This means there will likely be further amendments / adjustments / tweaks / etc. With 52 Republicans & 48 Democrats in the Senate I would expect another close vote. Assuming they are successful in passing a bill of their own, then the House bill and the Senate version of the bill must be reconciled and then voted on again by both chambers. Assuming that it is successful it is then sent to the president’s desk to sign.
My friends, it’s ugly, but this is democracy in action.
I personally have plenty of issues with this package, but no one from Washington called me to get my opinion, so I will simply report the facts and then do whatever I can to advance your financial objectives no matter what transpires. As opposed to Washington bureaucrats, I truly do work for you. 😊
President Trump is pushing for a July 4th target enactment date, but that is likely a bit ambitious in my personal opinion … but we shall see.
I will continue monitoring developments and their implications for your financial strategy. I’ll try not to bore you with too many play-by-play developments, but rest assured I’m watching closely and will communicate with you if/when action items are appropriate.
Please feel free to reach out with any questions or ways that we can support you.
Make it a great week ahead.