On Monday, the Senate Finance Committee released its version of the proposed tax provisions in the budget reconciliation bill, also known as the One Big Beautiful Bill. While much of the Senate’s version mirrors what the House proposed, there are a few key differences worth noting.

Below is a look at some of the key provisions in the Senate’s version of the bill, particularly those that we believe are most likely to impact you and your business. We’ve also highlighted how these provisions may or may not differ from the House version of the bill.

The Senate indicated that the text of the bill is incomplete and more changes are forthcoming. For instance, the bill kept the $10,000 state and local tax deduction limit

(SALT cap) that is currently in effect, with the Senate Finance Committee noting that “the amount of the individual SALT cap is the subject of continuing negotiations.”

While President Trump has signaled that he’d like to sign the bill by July 4, as of now the timing is still uncertain. There will likely be changes to the Senate’s version as negotiations continue, after which the bill will go back to the House for approval. We will continue to keep you apprised as developments occur.

Business Provisions

Bonus Depreciation

The bill would permanently extend the Section 168 additional first-year (bonus) depreciation deduction. The deduction would be 100% for property acquired and placed into service on or after January 19, 2025.

The House version would implement 100% bonus depreciation from January 19, 2025 through the end of 2029.

Section 179 Expense Limitation

The bill would increase the maximum amount a taxpayer can expense on depreciable business equipment under Section 179 from $1.25 million to $2.5 million. It would also increase the phaseout threshold from $3.13 million to $4 million.

No change from the House version.

Interest Limitation Rules 

The bill would reinstate the EBITDA limitation under Section 163(j) – the deduction for business interest expense – for tax years beginning after December 31, 2024. This would increase the amount of interest expense to deduct as depreciation, amortization, and depletion would be added back to adjusted taxable income, effectively raising the 30% limitation threshold.

The House version would reinstate the Section 163(j) EBITDA limitation for tax years beginning after December 31, 2024 through January 1, 2030.

R&D Expenses Under Section 174

The bill would permanently suspend the Tax Cuts and Jobs Act’s (TCJA) requirement that research and development (R&D) expenses be capitalized and amortized over a five-year period. Businesses would be allowed to immediately deduct eligible domestic R&D expenses paid or incurred beginning after December 31, 2024. However, expenditures for research conducted outside the U.S. would be required to continue to be capitalized and amortized over 15 years.

The bill also includes a provision for small businesses with average annual gross receipts of $31 million or less. These businesses would be eligible to retroactively deduct eligible expenses for tax years beginning after December 31, 2021, on an amended return.

All taxpayers – large and small – who complied with the Section 174 requirements would be permitted to elect to accelerate the remaining deductions over a one- or two-year period.

The House version would suspend the capitalization and amortization requirement for domestic R&D expenses paid or incurred after December 31, 2024 and before January 1, 2030. It does not include a separate provision for small businesses nor the election to accelerate the remaining amortization over a one- or two-year period.

Business Loss Carryforwards

The bill amends Section 461(I)(2) to provide that any excess business loss of a noncorporate taxpayer is carried forward as an excess business loss instead of being treated as a net operating loss. The impact would limit the future use of these business losses.

No change from the House version.

Special Depreciation Allowance

The bill would provide an elective 100% first-year depreciation allowance for qualified production property. The definition of qualified production property would include new construction or improvements to commercial building and structures used in the manufacturing, processing, and refinement industry. This provision applies to construction beginning after January 19, 2025.

No change from the House version.

SALT Deduction for Pass-Through Entities

The bill does not repeal pass-through entity tax (PTETs) for specified service trades or businesses. However, it generally limits PTETs to the greater of $40,000 or half of the otherwise allowed PTET deduction. An individual-level limitation is established for owners’ separately stated shares of PTET’s of a partnership or S Corporation.

The House version of the bill would have blocked owners of certain businesses – notably service firms like law, accounting, and health – from deducting passthrough entity taxes (PTETs), but the Senate version does not.

Clean Energy Provisions

The bill would repeal or phase out a large number of clean energy credits, particularly as they relate to electric vehicles, property investments in energy efficiency, clean energy, and alternative fuels.

No change from the House version.

Individual Provisions

Tax Cuts and Jobs Act Extensions

Both the Senate and House versions of the bill would make the TCJA individual tax rates permanent and would modify the inflation adjustment mechanism for individual tax brackets.

The Senate version of the bill would also make permanent the following TCJA provisions:

  • Standard deduction: The bill would make the TCJA’s increased standard deduction amounts permanent. For tax years 2025 – 2028, the standard deduction for married taxpayers filing jointly would increase by $2,000. It would increase by $1,500 for heads of household and $1,000 for all other taxpayers.

No change from the House version.

  • Personal exemptions: The deduction for personal exemptions would be permanently set at zero. The bill would also provide a temporary (tax years 2025 – 2028) $6,000 deduction for taxpayers aged 65 or older. There would be phaseouts for this “senior bonus” for taxpayers with higher modified adjusted gross income.

The House version would also set the personal exemption deduction limit at zero and would include a senior bonus. However, the senior bonus in the House version is $4,000.

  • SALT deduction: The SALT deduction is the largest point of contention between the House and Senate versions of the bill. The Senate version would retain the current limit on the federal deduction for state and local taxes (the SALT cap) of $10,000, but as noted earlier, this provision is still being negotiated.

The House version would increase the SALT cap to $40,000 per household ($20,000 for married taxpayers filing separately), starting in 2025. The $40,000 deduction would be phased out for taxpayers with modified adjusted gross income over $500,000 ($250,000 for married taxpayers filing separately). For tax years between 2026 and 2033, the $40,000 cap and the $500,000 phase out would be increased by 1% per year. The SALT cap would remain at that level after 2033.

  • Estate and gift tax exemption: The estate and gift tax exemption and generation skipping transfer tax exemption would be permanently increased to $15 million ($30 million for married filing jointly). This amount would be indexed for inflation after 2025.

No change from the House version.

  • Alternative minimum tax (AMT): The bill would make the increased AMT exemption amount permanent.

No change from the House version.

  • Qualified business income: The Section 199A qualified business income deduction would be made permanent but the deductible amount for qualified businesses would remain at 20%.

The House version would increase the deductible amount for qualified businesses from 20% to 23%.

  • Child tax credit: The Senate bill would permanently increase the amount of the child tax credit to $2,200 per child beginning in 2025. The credit amount would be indexed for inflation in subsequent years.

The House version would increase the credit to $2,500 for tax years 2025 – 2028 and would revert to $2,000 after that.

Taxation of Tips

The Senate’s version of the bill would exempt up to $25,000 of wages in the form of tips from taxation through an “above-the-line” deduction, meaning it is available to taxpayers claiming the standard deduction. The deduction would phase out for workers making more than $300,000 (married filing joint) or $150,000 (single) per year for years 2025 through 2028.

The House version of the bill would exempt all tips from taxation for workers making less than $320,000 (married filing joint) or $160,000 (single) per year.

Taxation of Overtime

Similarly, the bill would exempt up to $12,500 in overtime wages from taxation via an above-the-line deduction. The deduction would phase out for workers making more than $300,000 (married filing joint) or $150,000 (single) per year for years 2025 through 2028.

The House version of the bill would exempt all overtime wages from taxation for workers making less than $320,000 (married filing joint) or $160,000 (single) per year for years 2025 through 2028.

Tax-Favored Savings Accounts for Children

The bill establishes new tax-favored savings accounts for children under the age of 8 when the account is established. Contributions to these so-called “Trump accounts” would be limited to $5,000 per year, adjusted for inflation, until the beneficiary turns 18. Distributions for qualified expenses (such as higher education expenses), permitted after age 18, would be subject to capital gains tax. Other distributions would be subject to income tax plus an additional 10% if the beneficiary is under age 30.

The bill would also direct the Treasury to pay a one-time credit of $1,000 into Trump accounts for children born after December 31, 2024 and before January 1, 2029, who are U.S. citizens at birth.

No change from the House version.

What’s Next for the Legislation

As mentioned previously, negotiations in both chambers of Congress are expected to be ongoing and there is a great deal of uncertainty about whether the legislation can be passed before President Trump’s July 4 deadline. We will continue to keep you updated as developments occur.

In the meantime, if you have any questions about this pending legislation or any other tax matters, please contact your Kreischer Miller relationship professional or any member of our Tax Strategies team.