As of May 21, 2025, President Trump’s proposed tax legislation remains under active debate and revision. Introduced as part of a broader budget reconciliation package, the proposal seeks to extend or expand key provisions from the Tax Cuts and Jobs Act (TCJA) while introducing new tax incentives for individuals and businesses. While the bill continues to evolve, none of its provisions have been enacted into law. The following summary outlines the key tax-related measures currently under consideration and their potential impact on taxpayers.
Proposed Business Tax Changes
SALT Cap Changes: The proposed bill would replace the temporary $10,000 cap on state and local tax (SALT) deductions with a new $30,000 cap, phased out for higher-income taxpayers. It would also permanently disallow certain deductions for state, local, and foreign taxes and restrict the deductibility of “specified taxes,” such as substitute payments and certain taxes paid by partnerships or S corporations, limiting the use of pass-through entity tax (PTET) workarounds.
Qualified Business Income (QBI) Deduction: The QBI deduction would be made permanent and increased from 20% to 23%. The income threshold phase-in would be adjusted to 75%, and qualified business development company (BDC) dividends would now qualify. Thresholds would be indexed for inflation beginning in 2026.
Bonus Depreciation and Section 179: The bill would restore 100% bonus depreciation for qualified property placed in service from January 19, 2025, through January 1, 2030. The Section 179 limit would increase to $2.5 million, with a phaseout threshold of $4 million.
R&D Expensing: The requirement to capitalize and amortize domestic R&D costs over five years would be suspended through 2029, allowing for full expensing.
Interest Deduction Relief: From 2025 to 2029, interest deduction limits would be based on EBITDA rather than EBIT, allowing larger deductions by including depreciation and amortization.
Clean-Energy Rollbacks: Numerous clean-energy incentives would be scaled back or repealed, including credits for electric vehicles, energy-efficient homes, and clean electricity production.
Reporting Thresholds: The reporting threshold for third-party network transactions would revert to $20,000 and 200 transactions. The Form 1099 reporting threshold for certain payments would increase from $600 to $2,000, with inflation adjustments starting after 2026.
Business Investment Incentives: To encourage U.S.-based manufacturing, a 100% depreciation allowance for qualified production property would be introduced.
Employer Child Care Credit: The credit for employer-provided childcare would rise from 25% to 40%, or 50% for eligible small businesses. The annual cap would increase to $500,000 ($600,000 for small businesses) and be adjusted for inflation.
Paid Leave Credit: The employer credit for providing paid family and medical leave would be made permanent.
Key Individual Tax Provisions
Individual Tax Rates: The bill would make TCJA’s lower income tax rates permanent and revise how tax brackets are adjusted for inflation.
Itemized Deductions: The bill would eliminate miscellaneous itemized deductions and replace the Pease limitation with a 2/37 phaseout formula for high-income taxpayers.
Charitable Deduction for Non-Itemizers: Taxpayers who claim the standard deduction can deduct up to $150 or $300 for joint filers for philanthropic contributions made between 2025 and 2028.
Child Tax Credit: The credit would increase to $2,500 per child from 2025 through 2028, then return to $2,000. The refundable portion ($1,400) would become permanent and adjusted for inflation after 2028.
Adoption Credit: Up to $5,000 of the adoption tax credit would become refundable.
Senior Bonus Deduction: From 2025 to 2028, taxpayers 65 and older could claim a $4,000 deduction regardless of whether they itemize. The deduction would be phased out for single filers with an income of $75,000 and above, and married couples filing jointly with an income of $150,000.
No Tax on Tips: Cash tips reported on W-2s or select 1099s would be deductible from 2025 to 2028 for eligible occupations, excluding highly compensated employees and certain industries.
Overtime Pay Deduction: Non-highly compensated employees could deduct qualified overtime pay reported on their W-2.
Car Loan Interest Deduction: Interest on personal auto loans (up to $10,000/year) would be deductible from 2025 to 2028 for U.S.-assembled vehicles, with phaseouts above $100,000/$200,000 income levels.
Mortgage Interest & Insurance: The $750,000 mortgage debt cap and home equity loan interest exclusion would be permanent.
Casualty Losses: The casualty loss deduction for losses tied to federally declared disasters would be made permanent, with an expanded definition of what constitutes a “qualified disaster area.”
Transportation and Moving Deductions: Bicycle commuting reimbursements would become taxable, and moving expense deductions would be eliminated except for active-duty military.
529 Plan Expansion: Qualified expenses would expand to include K-12 private school tuition, homeschooling, and post-secondary credentialing programs.
Student Loan Discharges: Loans discharged due to death or disability would remain tax-free. A temporary expansion covering student loans discharged from 2020 to 2026 would be repealed.
Employer-Paid Student Loans: The exclusion for employer-provided educational assistance (up to $5,250) would be made permanent and indexed for inflation after 2026.
Estate and Gift Taxes: The exemption would be permanently raised to $15 million, indexed for inflation after 2025.
Alternative Minimum Tax: Increased AMT exemption amounts under TCJA would become permanent.
While this alert focuses on tax-related provisions, the bill includes other significant measures, such as creating Money Accounts for Growth and Advancement (MAGA), modifying Medicaid eligibility, and expanding HSA eligibility for certain Medicare enrollees.
It’s important to note that none of these proposals are law. The bill is still under debate and likely to be revised significantly before reconsideration. We will continue to monitor developments and provide updates as they unfold.
Disclaimer: This content is intended for general informational purposes only and should not be considered professional or legal advice.