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A Review of the House’s Tax Proposal 

By Griffin H. Bridgers J.D., LL.M. (Taxation)

On May 22, 2025, the House of Representatives passed the One Big Beautiful Bill Act by a one-vote margin. This bill adopted many of the recommendations of the House Ways and Means Committee, but with some changes along the way. While the bill and its proposals must now be taken up by the Senate as part of the budget reconciliation process, the following are some highlights of the changes that affect individuals within the bill itself. Note that this list is not intended to be all-inclusive, but many of the proposals address tax items that are otherwise subject to sunset at the end of 2025 as part of the Tax Cuts and Jobs Act of 2017.

  • The 2017 changes to the tax brackets (including the maximum rate of 37%), along with the replacement of the personal exemption for individuals with an enhanced standard deduction, are made permanent.  In addition, through 2029, there is a temporary increase to the standard deduction of $2,000 for joint filers, $1,500 for heads of household, and $1,000 for single or separate filers.  

  • The estate and gift tax basic exclusion amount for U.S. citizens and residents will be raised to a permanent base of $15,000,000 per individual, with this amount being adjusted for inflation for tax years after 2026.   

  • The expanded child tax credit is made permanent, with a temporary increase to $2,500 per child through 2028.  After 2028, the credit will revert to a base of $2,000 but with inflation adjustments applying to this base amount for tax years after 2024.   

  • The deduction for qualified business income is made permanent, and increased to 23%.  However, there are some changes to the calculation and types of income taken into account as relates to specified service trades or businesses.   

  • The elimination of the deductibility of miscellaneous itemized deductions (subject to the 2% floor) is made permanent, along with a new itemized deduction phaseout equal to 2/37ths of the lesser of (1) total itemized deductions, or (2) amount by which tentative taxable income (before counting phaseout) exceeds the point at which the 37% rate bracket kicks in.  

  • Seniors who have reached age 65 will be entitled to an increase of $4,000 to their standard deduction through tax year 2028.  This bonus $4,000 is not adjusted for inflation, and is reduced by 4% of the excess of modified adjusted gross income over $75,000.  

  • Last but not least, the cap on the deductibility of state and local income taxes (SALT) will have some sweeping changes
    • For 2025, the SALT limitation will be $40,000 (or one-half of that limit for married filing separately) subject to an income phasedown equal to 30% of the excess over $505,000 (or one-half of that limit for married filing separately).  Regardless, the SALT cap will not be reduced by phasedown to less than $10,000 (or one-half of that limit for married filing separately). 
    • Starting in 2026, a cap of $40,400 annually (or one-half for married filing separately), with the same 30% phasedown as stated above. 
    • These limits will increase by 101% per year from 2027 through 2033, after which the adjusted amounts for 2033 shall remain constant.  
    • Foreign real property taxes are not deductible, but the cap does not apply to “excepted taxes” which include general foreign, state, or local income and property taxes that are paid in connection with the conduct of a trade or business or the production of income.   
    • For the payment of pass-through entity taxes not in connection with the conduct of a trade or business (as defined under 199A), these appear to be subject to the SALT cap – thus preventing the use of this state tax election as a workaround. 

We also find some new proposals, including but not limited to the following: 

  • A new deduction is proposed (below the line but without having to itemize) through 2028 for qualified tips that are received in cash by an individual in an industry that ordinarily and customarily received tips before 2025.  (In other words, you cannot just pivot your business to a gratuity-based business and claim the deduction.)  The qualified tips must be validly reported by the recipient or payor (such as an employer collecting them at the source), and cannot come from a specified service trade or business (as determined for QBI purposes) nor be deducted by a highly-compensated employee (as determined for qualified retirement plan purposes).  The deduction will be taken into account for purposes of tax withholding by an employer, and is further reduced by any other trade or business deductions available to the recipient (including cost of goods sold) to avoid double-dipping. Within 90 days of enactment, Treasury will publish a list of which occupations are considered to ordinarily and customarily receive tips. 

  • Through 2028, a new deduction (below the line but without having to itemize) is proposed for qualified overtime compensation (as indicated on Form W-2, as a new reporting requirement).  This does not include all overtime – the deduction only applies to compensation paid at a rate above the normal rate (i.e., if you are paid 50% more than your hourly rate, you can only deduct this 50% excess received above your hourly rate).  It does not include qualified tips, but as with qualified tips, withholding by the employer will be adjusted to take into account the deduction.  

  • Through 2028, qualified passenger vehicle loan interest may be deductible above-the-line for loans incurred in 2025 or after.  This deduction is capped at $10,000, reduced by $200 for each $1,000 or portion thereof by which the modified adjusted gross income exceeds $100,000 ($200,000 joint).  This applies only to purchase indebtedness secured by a first lien on the vehicle (including refinancing up to the amount of the refinanced debt), but it can only apply to a vehicle for which final assembly occurred in the U.S.  The definition of passenger vehicles is quite broad, including motorcycles, ATVs, RVs, and campers.  

  • A new form of custodian account for minors and young adults, called “Trump” accounts (initially called MAGA accounts in the initial Ways & Means proposal) is added – along with a pilot program for the government to $1,000 to Trump accounts for each eligible individual born from 2025 to 2029.  These accounts can be established for individuals under age 8, and funded with up to $5,000 per year until the beneficiary reaches age 18, indexed for inflation for tax years after 2025.  As with a 529, investment in the account is distributed tax-free with earnings being tax deferred until distribution subject to qualified expense requirements.  Any distributions of earnings applied for qualified expenses are taxed as capital gains, with other distributions of earnings being taxed as ordinary income.  In addition to education expenses similar to those permitted by 529 accounts, qualified expenses can include business expenses (if there is an outstanding federal loan for the business) or the purchase of a principal residence.  The taxable portion of distributions that do not qualify for capital gains treatment are subject to a 10% penalty for distributions prior to age 30. But, the entire account must be distributed by age 31, and no more than half can be distributed prior to age 25. 

There are many other changes or extensions with respect to bonus depreciation and expensing health plans and HSAs, energy credits, and taxes on endowments.  For now, there are bound to be changes at the Senate level.  But, the satisfaction of President Trump’s stated goal of wrapping up tax reform by the end of summer is not completely outside of the realm of possibility.  Such an outcome, while not guaranteed, would no doubt come as a relief to practitioners and taxpayers who are accustomed to the year-end scramble of planning for tax law changes or sunsets.    

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ABOUT THE AUTHOR

Griffin H. Bridgers, J.D., LL.M. is a part-time attorney with the law firm of Hutchins & Associates in Denver, Colorado, and is admitted to practice in Colorado and Tennessee. Griffin also serves as an outsourced estate planning strategist for independent advisory firms including Mosaic Advisors in Houston, Texas and Alpha Principle in Englewood, Colorado. Griffin is a frequent presenter on tax and estate planning topics for estate planning councils, bar associations, and CLE and CPE providers. Since 2020, Griffin has educated fellow attorneys and wealth transfer professionals through his YouTube channel and his newsletter, State of Estates, amassing over 350 video presentations and 150 articles on a variety of topics. Griffin is best known for navigating the education gap between introductory and advanced topics.

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