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Senate Update: Key Tax Changes and Next Steps for the “One Big Beautiful Bill”
On July 1, 2025, the Senate narrowly passed its version of the “One Big Beautiful Bill,” with Vice President JD Vance casting the tie-breaking vote after an extended session. The bill now returns to the House for further review and possible amendments.
On July 1, 2025, the Senate narrowly passed its version of the “One Big Beautiful Bill,” with Vice President JD Vance casting the tie-breaking vote after an extended session. The bill now returns to the House for further review and possible amendments. Final approval will require both chambers to agree on the same version before the President can sign it into law. We are monitoring these developments closely and will keep you informed about how the final legislation may affect your tax situation.
Notable tax-related updates in the Senate version include:
- Permanent Extension of 2017 Tax Cuts: Most individual and business tax cuts from the 2017 TCJA would become permanent, preventing automatic tax increases at the end of 2025.
- No Taxes on Tips and Overtime: The Senate version caps the tip exemption at $25,000 and the overtime exemption at $12,500 ($25,000 for joint filers), with phase-outs beginning at $150,000 ($300,000 for joint filers) of income. These provisions are temporary and apply from 2025 through 2028.
- SALT Deduction Cap: The Senate maintains the $40,000 SALT deduction cap for married couples earning up to $500,000 but reinstates the $10,000 cap after five years, a more restrictive approach than the House version, which did not specify a sunset.
- Clean Energy Credits: The Senate accelerates the phase-out of renewable energy tax credits, including eliminating the $7,500 electric vehicle credit after September 30th 2025.
Solar and wind projects will need to be placed in service by the end of 2027 to access the 45Y and48E credits and construction must begin within 12 months of the bill’s enactment.
- Senior Deduction: The Senate increases the additional standard deduction for seniors to $6,000, up from $4,000 in the House version.
- Charitable Deduction: The Senate establishes a permanent standard deduction for charitable donations of up to $1,000 ($2,000 for joint filers), whereas the House version included a smaller, temporary deduction.
- Car Loan Interest Deduction: The Senate allows a $10,000 deduction for interest on new car loans for vehicles assembled in the U.S., phasing out by 2028, a clarification and cap not present in the House bill.
The bill also includes significant spending cuts to Medicaid and other federal benefit programs, which remain points of contention and could affect the final outcome in the House.
What’s Next:
The House is expected to take up the revised bill as early as this week with plans to still get this bill passed by the July 4th recess. If further changes are made, the legislation will require additional negotiation before it can become law. We are closely monitoring these developments and will provide timely updates on how the final provisions may impact your tax planning.
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