One of the biggest legislative achievements President Trump hopes to accomplish in 2025 is the preservation of his signature 2017 Tax Cuts and Jobs Act (TCJA). The new tax bill being negotiated by Congress, known as the One Big Beautiful Bill Act, hopes to make permanent most of the tax cuts embedded in the original act, and to add several other changes to the tax code, including a few temporary credits and deductions good for tax years 2025 through 2028.
Moving the legislation through Congress has proven to be a challenge, as there are disagreements about what to include in the bill and how to fund it, given the significant price tag of extending all of the TCJA.1 Among the considerations to pay for the bill are cuts to Medicaid spending and the repeal of so-called green tax credits for electric vehicle purchases as well as domestic and business energy upgrades, passed in 2022 as part of the Inflation Reduction Act.
The original TCJA made substantial changes to the tax code, including expanding tax brackets and lowering the top tax rate, increasing the standard deduction, capping the mortgage interest and state and local tax (SALT) deductions, as well as increasing the federal gift and estate tax exemption.
Here are the major sections that are slated to sunset at the end of 2025 without Congressional action.
As the House tax bill makes its way to the Senate details are likely to change, but here’s where things stand now.
What’s inside the One Big Beautiful Bill Act?
The following provisions were all part of the original TCJA and would become a permanent part of the tax code if the House-passed Act is enacted with no changes.
- The 7 tax brackets as defined by the original 2017 TCJA with a top rate of 37% for higher earners and a bottom rate of 10% for lower earners will remain the same.
- The mortgage interest deduction would remain at its current limit of $750,000 in mortgage debt. It had been reduced from a threshold of $1 million of mortgage debt in 2017.
- The SALT deduction, capped at $10,000 for all filers in 2017, would increase to $40,000 ($20,000 for married people filing separate returns).
- The standard deduction, which doubled in 2017, would be made permanent, with a one-year inflation adjustment and a temporary increase of $1,000 for single filers and $2,000 for couples who are married filing jointly. For 2026 these amounts would be $16,200 for single filers and $32,600 for married filers.
- The lifetime gift and estate tax exclusions, which have more than doubled since 2017, would increase to $15 million for single filers from $13.99 million and to $30 million from $27.98 million for those who are married filing jointly. Going forward, the exclusions would be indexed to inflation.
- The Child Tax Credit (CTC) would increase by $500 to $2,500 until December 31, 2028 when it would revert to $2,000, but it would be indexed for inflation starting in 2026. The TCJA doubled the credit in 2017 from $1,000 and increased income phase-out thresholds to qualify for the credit. The increased income thresholds would also be maintained, as well as the credit for non-dependent children.
Find out more about this credit in Viewpoints: What is the Child Tax Credit?
- The repeal of the personal exemption deduction. Prior to TCJA, individuals who itemized could deduct up to $4,050 for themselves, a spouse, and each dependent. (While the personal deduction was repealed until December 31, 2025, the standard deduction and the CTC both doubled.) The personal exemption deduction will be eliminated permanently.
A new saving account for parents
- Trump accounts. The bill proposes a savings account called the Trump account fundable up to $5,000 a year on an after-tax basis for children, so there is no upfront tax benefit. Contributions can be made by parents, relatives, or any other “taxable entity,” according to the legislation, until age 18, at which point half of the funds could be withdrawn and any gains would be taxed at the long-term capital gains tax rate, so long as the money is used for qualified expenses, which include education costs, the down payment on a first home, or as capital to start a small business. After age 30, the remainder of funds could be withdrawn for any purpose. Withdrawals would be taxed at ordinary income rates if spent for other purposes prior to age 30. Parents of newborns born between January 1, 2025, and January 1, 2028, would also qualify for $1,000 in federal seed money to start the account. Although not income restricted, Trump accounts are similar to Connecticut Baby Bonds, which invest $3,200 into accounts for newborns of lower income parents.
Also under consideration
- Expanded uses for health savings accounts (HSAs) and 529s. The bill would widen the types of health plans and participants eligible to use an HSA. It would also expand uses for an HSA for gym memberships and fitness reimbursement and allow participants in high-deductible health plans to receive services at on-site employer health clinics. Additionally, it would allow married couples who file taxes jointly to contribute catch-up contributions to the same HSA. Working seniors entitled to Medicare Part A and enrolled in a high-deductible health plan could also continue contributing to an HSA. The bill also proposes to expand uses of 529 funds to include things such as testing fees, tutoring outside the home, and educational therapies for students with disabilities, among other things. It would also allow for tax-free withdrawals for recognized postsecondary credential programs.
Learn more about spending from a 529 account.
Temporary provisions good for 4 years
In addition to the permanent provisions, the bill proposes numerous temporary deductions and credits good only for tax years 2025 through 2028. These are as follows.
No taxes on tips or overtime. The new tax bill would provide a temporary deduction for tipped income and hours worked in excess of a regular workweek hours for hourly employees. Tips would continue to be included in the base for FICA taxes (Social Security or Medicare tax).
An added senior tax deduction. People age 65 and older would get an additional $4,000 deduction per filer with modified adjusted gross income of $75,000 or less for single filers and $150,000 or less for married filers. Note: The enhanced deduction would be in addition to the $2,000 single filers and $3,200 married filers are currently able to deduct if they are 65 or older.
Deductible car loan interest. The tax bill allows for a deduction of up to $10,000 of loan interest for purchased vehicles whose final assembly took place in the US. The deduction would apply to single taxpayers with modified adjusted gross income of $100,000 or less ($200,000 or less for people who are married filing jointly).
What isn't in the One Big Beautiful Bill Act?
No taxes on Social Security. President Trump campaigned on eliminating taxes on Social Security benefits, which are taxable up to 85% for individuals with income of more than $34,000 or a couple with combined income of $44,000 or more. The $4,000 enhanced deduction for people who are 65 and older may help offset taxes on Social Security benefits for some individuals with income at these thresholds for the next 4 years.
Find out more about Social Security taxes in Viewpoints: Is Social Security taxable?
Keep informed
Remember tax legislation is complicated and details of the bill are likely to change as it advances through the legislative process. Stay engaged. Plan for different tax scenarios. Also, everyone's financial situation is different. Consider speaking with a financial or tax professional about your individual needs throughout the year.