After initially stalling in committee, a proposed tax and spending bill advanced late Sunday, May 19, 2025, following intensive negotiations among lawmakers. Though the bill moved past a key procedural step, it has not yet been passed into law and remains subject to further revisions and debate.
The proposed legislation includes approximately $3.8 trillion in tax cuts over the next decade. It aims to extend or modify several provisions of the 2017 Tax Cuts and Jobs Act (TCJA), while introducing new deductions and credits targeted at individuals, families, and businesses.
Key Proposed Tax Changes for Individuals
Lower Income Tax Rates Made Permanent
The bill would permanently extend the lower individual income tax rates set to expire at the end of 2025. It would also modify how tax brackets are adjusted for inflation.
Itemized Deductions
The bill proposes eliminating miscellaneous itemized deductions and the Pease limitation. Instead, it introduces a new formula that reduces itemized deductions based on income thresholds.
Charitable Deduction for Non-Itemizers
From 2025 through 2028, standard deduction filers could claim up to $150 ($300 for joint filers) for charitable contributions.
Expanded Child Tax Credit
The credit would increase to $2,500 per child from 2025 through 2028, then revert to $2,000. The refundable portion would be made permanent and indexed to inflation starting in 2029.
Refundable Adoption Credit
Up to $5,000 of the adoption tax credit would become refundable.
Senior Bonus Deduction
Individuals aged 65+ could claim a $4,000 deduction (phasing out above $75,000 in income, or $150,000 for joint filers) from 2025–2028.
Deduction for Tips and Overtime Pay
A new above-the-line deduction would apply to qualified reported cash tips and overtime wages for non-highly compensated employees from 2025 through 2028.
Car Loan Interest Deduction
Interest on personal car loans (up to $10,000 annually) for vehicles assembled in the U.S. would be deductible from 2025–2028, subject to income limits.
Mortgage Interest and Insurance
The $750,000 mortgage cap for interest deduction would be made permanent. Home equity loan interest would also continue to qualify.
Casualty Loss Deduction
Casualty losses from federally declared disasters would remain deductible, and the definition of “qualified disaster area” would be expanded.
Bicycle Commuting Reimbursements
These reimbursements would no longer be excluded from taxable income.
Moving Expenses
The moving expense deduction would be permanently eliminated, except for active-duty military.
Expanded 529 Plan Uses
Expenses for K–12 schooling, homeschooling, and certain postsecondary programs would qualify for 529 plan distributions.
Student Loan Discharge Exclusion
Forgiven student debt due to death or disability would remain excluded from taxable income.
Employer-Paid Student Loans
Employer-provided educational assistance (up to $5,250 annually) would remain tax-free and be adjusted for inflation after 2026.
Estate, Gift, and Generation-Skipping Transfers
The exemption would increase to $15 million, adjusted for inflation beginning in 2026.
Alternative Minimum Tax (AMT)
Higher exemption levels introduced under the TCJA would be made permanent.
Key Proposed Tax Changes for Businesses
Qualified Business Income (QBI) Deduction
The QBI deduction would be increased to 23% and made permanent. Phase-in thresholds would be adjusted, and dividends from certain entities would be included.
Bonus Depreciation and Section 179 Expensing
100% bonus depreciation would be restored for certain property placed in service between Jan. 19, 2025, and Jan. 1, 2030. Section 179 limits would increase to $2.5 million, with a $4 million phaseout threshold.
Research & Development (R&D)
Immediate expensing of domestic R&D costs would be allowed through 2029.
Interest Deduction Rules
Business interest deductions would be calculated based on EBITDA from 2025 through 2029.
Clean-Energy Provisions
The bill would phase out or repeal several clean-energy tax credits.
Reporting Thresholds
Third-party payment reporting thresholds would revert to $20,000 and 200 transactions. The reporting threshold for non-employee compensation would increase to $2,000 and be inflation-adjusted.
Business Investment Incentives
A new 100% depreciation allowance would be introduced for investments in “qualified production property.”
Employer-Provided Child Care Credit
The credit would increase to 40% of qualified expenses, up to $600,000 for small businesses, with annual limits indexed for inflation.
Paid Family and Medical Leave
The credit for employer-provided paid family and medical leave would be made permanent.
SALT Deduction Cap
The bill proposes increasing the state and local tax (SALT) deduction cap to $30,000 with income-based phaseouts. Certain payments made in exchange for tax benefits and taxes paid by pass-through entities would be excluded from deductible amounts.
Legislative Status: Not Yet Law
While the bill has cleared a procedural step in the House, it remains under active negotiation. Several aspects of the legislation—including spending provisions and tax offsets—are still being debated, and additional changes are likely before it reaches the House floor. None of the proposed changes are currently in effect.
We will continue to monitor legislative developments and provide updates as the proposal evolves.
If you have questions about how these proposed changes could affect you or your business, contact your Stephano Slack tax manager or partner at 610-687-1600 or TaxInfo@StephanoSlack.com.
Author Jackie Himes, CPA, partner, is a trusted authority in serving high-net-worth individuals and closely held businesses. She provides strategic financial guidance that fuels growth and sustainability. Jackie’s extensive experience in private equity enables her to navigate complex investment structures and maximize tax efficiencies, consistently delivering tailored solutions for her clients’ success. She can be contacted at 610-710-4057 or Jhimes@stephanoslack.com.
Disclaimer: This content is for informational purposes only and doesn’t constitute professional advice.
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