Client Alert: Major Federal Tax Reform Heads to Senate

May 27, 2025 | by Atherton & Associates, LLP

Client Alert
House Passes ‘One Big Beautiful Bill’: Key Tax Provisions and Next Steps

May 27, 2025
From the Office of Jackie Howell, CPA, Tax Partner

On May 22, 2025, the U.S. House of Representatives narrowly passed the “One Big Beautiful Bill,” a comprehensive tax and spending package championed by President Trump. The bill now advances to the Senate, where further deliberations are anticipated.

Highlights for Individual Taxpayers

• Permanent Extension of 2017 Tax Cuts: Permanently adopts the modified federal income tax brackets and reduced rates established by the TCJA, with an inflation adjustment for all brackets except the top 37% bracket.

• Enhanced Standard Deduction: Makes the expanded TCJA standard deduction permanent, temporarily boosting the standard deduction by $2,000 for joint filers, $1,500 for head of household, and $1,000 for all other taxpayers from 2025 through the end of 2028.

• Child Tax Credit: Increases and adjusts the credit for inflation, benefiting over 40 million families. From 2025 to 2028, the maximum credit temporarily increases to $2,500.

• Tax Exemptions: Eliminates federal income tax on tips, overtime pay, and car loan interest for vehicles assembled in the U.S.

Key Business Provisions

• Qualified Business Income (QBI) Deduction: Increases the deduction to 23% for pass-through entities.

• Interest Expense Limitation: Increases the cap on business interest deductibility by allowing depreciation, amortization, and depletion to be excluded from adjusted taxable income, effective from 2025 to 2029.

• Bonus Depreciation: Restores 100% bonus depreciation for qualified property acquired from 2025 through 2029.

• Research and Development: Allows immediate expensing of domestic R&D costs from 2025 through 2029.

• Excess Business Loss Limitation: Permanently extends the limitation on excess business losses for noncorporate taxpayers, allowing any unused losses to carry forward to the subsequent year. However, the losses will be taken into account in the computation of the excess business loss for that subsequent year.

Additional Measures

• SALT Deduction Cap: Permanently raises the state and local tax (SALT) deduction cap to $40,000 with a phased reduction beginning at $250,000 for single filers and $500,000 for joint filers.

• Senior Deduction: Adds a $4,000 deduction for seniors (65+) from 2025 to 2028, with income caps of $75,000 (single) and $150,000 (joint).

• Border Security and Defense: Allocates significant funding for border enforcement and national defense initiatives.

• Social Program Adjustments: Implements stricter work requirements for Medicaid and reduces funding for certain programs.

• Estate and Gift Tax: Permanently raises the exemption to $15 million, adjusted for inflation.

Fiscal Considerations
The Congressional Budget Office estimates the bill will increase the federal deficit by $3.8 trillion over the next decade. Market reactions have included concerns over rising Treasury yields and potential impacts on the bond market.

Next Steps
The Senate will now consider the bill, with debates expected on various provisions, including the AI regulation moratorium and social program adjustments. Revisions are likely before any final enactment.

Action Items
If the bills passes in the Senate, taxpayers and business owners should consult with their tax advisors to assess how these proposed changes may impact their financial planning and tax strategies.

This alert is for informational purposes only and does not constitute tax or legal advice. Please consult your CPA or tax advisor for personalized guidance.