An Update on the One Big Beautiful Bill Act

The Senate version of the bill streamlines the House's tax provisions

This week, the Senate released its version of the One Big Beautiful Bill Act’s tax provisions. The final law will likely be close to this current Senate version; the Senate will likely pass its version and send it to the House for final passage.

While there is a self-imposed July 4, 2025, deadline to complete the legislation, there is another looming deadline: Treasury will likely need a debt ceiling limit increase by August 2025 to avoid potential default. The House version contains a $4 trillion increase, and the Senate version includes a $5 trillion increase.

We will not know the specifics of each provision until Congress passes a bill that the President signs into law. However, we continue to get closer to each provision's likely final version.

The House and Senate bills contain many tax provisions. Below is a brief description of the House and Senate versions of the most significant provisions impacting individuals and small business owners.

Individual Provisions

The following provisions are the most significant for individual taxpayers.

Child Tax Credit. House: The base child tax credit is permanently increased to $2,000. It is temporarily increased to $2,500 for tax years 2025 through 2028, and from tax year 2029 onward, the $2,000 base amount is inflation-adjusted.

Senate: The 2025 credit is permanently increased to $2,200 and inflation-adjusted.

Energy Credits. House: The §25C energy efficient home improvement credit, the §25D residential clean energy credit, and the §25E used clean vehicle credit are terminated starting in tax year 2026. The §30D clean vehicle credit is significantly restricted for tax year 2026 and then terminated beginning in tax year 2027.

Senate: The §25C, §25D, and §30D credits are terminated for purchases occurring more than 180 days after the law’s enactment, and the §25E credit is terminated for purchases occurring more than 90 days after the law’s enactment.

Estate Tax Lifetime Exemption. House: The exemption is reset to $15 million for tax year 2026 and is inflation-adjusted. This change is permanent.

Senate: This provision is the same as the House version.

Health Savings Accounts (HSAs). House: Individuals making less than $75,000 annually and families making less than $150,000 could contribute up to double the current HSA limit. Many other changes are proposed, including making bronze and catastrophic health plans purchased on an exchange eligible for HSA contributions and permitting certain fitness expenses, including gym memberships, up to an annual limit. Most of the HSA changes are effective starting in tax year 2026.

Senate: The House provisions are omitted from the Senate version.

International Money Transfers. House: A new 3.5% excise tax applies to remittance transfers sent from an individual in the U.S. to a recipient in a foreign country using a financial institution for transfers made after December 31, 2025.

Transfers sent by U.S. citizens or nationals using a qualified remittance service provider are exempt from the tax, and a new refundable tax credit is available for U.S. citizens and certain residents to offset the tax fully if it is imposed on them.

Senate: This provision is similar to the House version, but has some modifications.

Mortgage Interest Deduction. The mortgage interest deduction limit of $750,000 ($375,000 married filing separately) would be made permanent, as would the non-deductibility of home equity debt (i.e., debt secured by the residence but not used to buy, build, or improve the residence).

Senate: This provision is similar to the House version, except it also permanently adds mortgage insurance premiums on acquisition indebtedness as qualified residence interest under the same terms as the pre-2022 provision, starting in tax year 2026.

Overtime Deduction. House: For tax years 2025 through 2028, there is a new below-the-line individual deduction for qualified overtime compensation. Employees with earned income exceeding the highly compensated employee threshold and qualified tips (see below) are not eligible for the deduction.

Senate: This provision is similar to the House version, except it has a $12,500 annual deduction limit and begins to phase out at modified adjusted gross income (MAGI) of $150,000 ($300,000 joint).

Personal Casualty Losses. House: The TCJA provision, which allows them in connection with a federal disaster, or to the extent of personal casualty gains, is made permanent.

Senate: This provision is the same as the House version.

Senior Citizen Deduction. House: For tax years 2025 through 2028, taxpayers aged 65 and older can deduct an additional $4,000 from their taxable income. This deduction phases out at MAGI of $150,000 for joint filers and $75,000 for all other taxpayers.

Senate: This provision is similar to the House version, except it is $6,000 annually.

Standard Deduction. House: The proposal permanently extends the enhanced standard deduction and would add an extra year to the existing inflation adjustment. In addition, there would be a temporary increase of $1,000 for individual filers and $2,000 for joint filers for tax years 2025 through 2028.

Senate: This provision permanently increases the standard deduction to $16,000 for single, $24,000 for head of household, and $32,000 for joint in tax year 2026, and these amounts are inflation-adjusted.

State and Local Tax (SALT) Deduction. House: In tax year 2025, the individual SALT deduction cap increases to $40,000 ($20,000 married filing separately) and begins to phase down to $10,000 at a MAGI of $500,000. The cap is permanent; however, the thresholds will increase by 1% annually for 10 years starting in tax year 2026.

Senate: This provision is still being negotiated with the House, but the current version permanently establishes the $10,000 deduction cap.

Tax Rates. House: The TCJA’s lower rates for individuals are permanently extended beginning in tax year 2026. It also provides an additional year of inflation-adjustment for all income brackets except for the top 37% bracket.

Senate: This provision is similar to the House version, except the additional year of inflation-adjustment only applies to the 10%, 12%, and 22% brackets.

Terminated Provisions. House: These provisions are permanently terminated: the exemption deduction, miscellaneous itemized deductions subject to the 2% of AGI floor, and the moving expenses deduction and exclusion.

Senate: These provisions are very similar to the House versions.

Tip Deduction. House: For tax years 2025 through 2028, there is a new below-the-line individual deduction for qualified tips. Employees with earned income exceeding the highly compensated employee threshold or qualified tips from a §199A specified service trade or business (SSTB) are ineligible for the deduction.

Qualified tips include those earned in an occupation where tipping is customary before tax year 2025, are paid voluntarily, and are determined by the payer.

The §45B tip credit is permanently expanded to include beauty services, such as hair and nail salons, esthetics, and spas, effective in tax year 2025.

Senate: This provision is similar to the House version, except it has a $25,000 annual deduction limit and begins to phase out at MAGI of $150,000 ($300,000 joint). In addition, the Senate version does not modify the §45B credit.,

Business Provisions

The following provisions are the most significant for business taxpayers and individual taxpayers who own businesses.

§199A Deduction. House: The §199A deduction is made permanent, and the rate increases from 20% to 23%. In addition, the deduction phase-out over the taxable income threshold is modified so the deduction phases out more slowly. These changes take effect starting in tax year 2026.

Senate: This provision is similar to the House version, except the 20% rate is maintained, and the phase-in ranges for the §199A limitations increase to $75,000 for non-joint returns and $150,000 for joint returns.

Bonus Depreciation. House: The proposal restores 100% bonus depreciation for assets placed in service after January 19, 2025, and before January 1, 2030. In addition, qualified production property (a new property category) is eligible for full expensing if construction begins after January 19, 2025, and before January 1, 2029.

§179 expensing thresholds are increased from $1 million to $2.5 million, with the phase-out beginning at $4 million, starting in tax year 2025.

Senate: These provisions are similar to the House versions, except 100% bonus depreciation is made permanent.

Energy Credits. House: Most Inflation Reduction Act energy-related tax credits are phased out over the next five to seven years.

Senate: These provisions are similar to the House versions.

Excess Business Loss Limitation. House: This TCJA loss limitation provision is made permanent; it was scheduled to terminate in tax year 2029.

Senate: This provision is similar to the House version.

Form 1099 Reporting. House: Effective retroactively, the Form 1099-K reporting threshold is returned to $20,000 in gross sales and 200 transactions. Starting in tax year 2026, the general Form 1099 reporting threshold is increased from $600 to $2,000, and adjusted for inflation going forward.

Senate: These provisions are the same as the House versions except the Form 1099 threshold increases starting in tax year 2025.

Health Reimbursement Arrangements (HRAs). House: The proposal codifies and expands Individual Coverage HRAs and renames them “CHOICE Arrangements.”

Senate: The House provisions are omitted from the Senate version.

Opportunity Zones. House: A new round of opportunity zone investments, along with enhanced tax benefits, is authorized starting in tax year 2027 through tax year 2033.

Senate: This provision is similar to the House version, except it establishes a permanent opportunity zone policy that builds off of the original structure.

Pass-Through Entity Taxes (PTET). House: The proposal makes PTETs for §199A specified service trade or businesses (SSTBs) separately stated items for partnerships and S corporations, subject to the individual SALT deduction cap. This takes effect starting in tax year 2026.

Senate: This provision makes all PTET payments separately stated items, and individuals can deduct PTET payments on Schedule A up to their SALT cap plus the greater of $40,000 of their PTET allocation or 50% of their PTET allocation.

Research & Development Expenses. House: The proposal allows businesses to immediately deduct the cost of domestic research expenses in the year paid or incurred for tax years 2025 through 2029; however, the amortization of foreign research expenses is retained.

Senate: This provision permanently restores full expensing of domestic research expenses starting in tax year 2025. In addition, certain small taxpayers can apply this change retroactively back to tax year 2022, while all taxpayers who amortized expenses in tax years 2022 through 2024 can accelerate their remaining deductions over a one-year or two-year period.

These Proposals Can Change

The final law will likely be similar in scope and effect to the Senate's current version. While we cannot advise our clients to make changes based on the above legislation (because it is not final), we can undoubtedly answer client questions about the bill and begin to prepare for how we will offer paid advisory services to taxpayers materially impacted by the new law.

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