On May 22, 2025, the House of Representatives passed H.R. 1, sending a broad tax and domestic policy package to the Senate for further consideration. While the bill represents a significant step in advancing President Trump’s proposed agenda, none of its provisions are currently law, and the final version remains subject to change.
Though the legislation covers a wide range of policy areas, including healthcare, energy, and education, this summary focuses on the tax-related provisions most relevant to individuals and businesses, particularly changes tied to the Tax Cuts and Jobs Act (TCJA) and the state and local tax (SALT) deduction.
SALT Deduction Cap Expansion
A key provision in the House-approved bill expands the federal deduction for state and local taxes. Beginning in tax year 2025, the SALT cap would rise to $40,000 per household ($20,000 for married taxpayers filing separately), with a phase-out for individuals earning over $500,000 in modified adjusted gross income ($250,000 for married filing separately). These thresholds would increase by 1% annually from 2026 through 2033, then remain fixed.
The bill does not extend SALT deductibility to specified service trades or businesses (SSTBs) such as law, medicine, consulting, and financial services, limiting the benefit of state-level pass-through entity tax (PTET) workarounds for many business owners.
Individual Tax Provisions
The bill would make permanent several provisions of the TCJA set to expire after 2025, including:
- Lower marginal income tax rates
- A larger standard deduction
- A higher estate tax exemption
It also introduces new individual tax benefits:
- Elimination of federal income tax on tips and overtime pay
- A new $4,000 deduction for taxpayers age 65 and older, phased out at higher incomes
- A deduction for interest on car loans for vehicles manufactured in the United States
- A $1,000 increase to the standard deduction, effective through 2028
- A $500 bonus to the child tax credit
- Creation of “Trump accounts”, which would provide a $1,000 contribution for children born between January 1, 2025, and January 1, 2029, invested in the stock market
The bill would also repeal the Pease limitation on itemized deductions and replace it with a new formula that reduces deductions for higher-income taxpayers based on their income and SALT amounts.
The child tax credit would also be tightened by introducing stricter documentation and eligibility requirements, limiting access for certain households that previously qualified under more flexible rules.
Business and International Tax Changes
Businesses would benefit from:
- Expanded deductions for research and capital investment
- A new tax credit for domestic factory construction
- A more generous and permanent pass-through deduction
- Excess business losses for non-corporate taxpayers would no longer be treated as net operating losses (NOLs). Instead, they would be carried forward separately as excess business losses.
Changes to International Taxes
The bill also modifies upcoming changes to international tax provisions:
- The foreign-derived intangible income (FDII) deduction would be set at 36.5%, slightly lower than the current rate
- The global intangible low-taxed income (GILTI) inclusion deduction would be adjusted to 49.2%
- The base erosion and anti-abuse tax (BEAT), instead of rising to 12.5%, would increase modestly to 10.1%
Other Notable Tax Provisions
- University endowment tax: The excise tax on investment income would increase from 1.4% to as high as 21%
- Health insurance tax credits: Noncitizens who are not green card holders would be excluded from eligibility
- Contingent fees: Treasury would be prohibited from regulating the use of contingent fees in connection with tax return preparation and refund claims
Brief Overview of Non-Tax Provisions
Outside the tax code, the bill includes significant changes to Medicaid and health insurance programs, including stricter work requirements for certain adults and increased documentation to maintain eligibility. These changes are part of broader efforts to reduce program costs and tighten benefit administration.
In the energy sector, the bill phases out many clean energy tax credits introduced under the Inflation Reduction Act. Most credits would expire by the end of 2028, with limited exceptions for nuclear energy, biofuels, and carbon capture technologies.
What Happens Next
While the House has approved the bill, it must still be passed in the Senate before it can become law. Senators have already signaled that revisions are likely, particularly in areas related to healthcare and energy. For now, taxpayers and advisors should be aware that no provisions in the bill are currently in effect.