On May 22, 2025, the House of Representatives passed the House Republican Tax Bill, also known as the “One Big Beautiful Bill.” This legislation marks a significant shift in U.S. tax policy. Designed to expand upon the 2017 Tax Cuts and Jobs Act (TCJA), the bill introduces sweeping changes that will affect personal finances, businesses, and the broader economy.
This guide examines the plan’s key tax provisions, explores its implications for taxpayers and businesses, and analyzes its potential economic effects. By understanding these changes, you can assess how they might impact your financial planning and long-term goals.
In This Article:
- Extending & Expanding the TCJA Provisions
- Adjustments to Existing Tax Provisions
- Key New Tax Provisions (2025–2028)
- Special Provisions for Businesses
- Impact of the Tax Bill on Income Groups
- Impacts on Federal Revenue and Deficits
- Navigating Tax Reform
Extending & Expanding the TCJA Provisions
Building on the foundation of the TCJA and President Trump’s tax policies, the 2025 House Republican tax bill makes individual tax cuts permanent. It also introduces new initiatives aimed at reducing taxable income, encouraging savings, and addressing pressing economic issues.
Individual Income Tax Adjustments
The plan permanently extends the tax cuts initially introduced under the TCJA, which were set to expire at the end of 2025. This means lower tax rates and higher income thresholds will remain in place indefinitely. Additionally, the bill incorporates further inflation adjustments to these brackets, providing moderate annual relief for taxpayers. However, the projected cost of these changes to federal revenue amounts to $2.2 trillion over the next decade.
Standard Deduction Enhancements
One major win for taxpayers is the permanent extension of the doubled standard deduction. Starting in 2025, taxpayers will benefit from an additional inflation-adjusted deduction of $1,000 for single filers and $2,000 for married filers through 2028. These changes are expected to greatly reduce tax bills for those who claim the standard deduction at a projected cost of $1.3 trillion over the next ten years.
2025-2026 Standard Deduction, TCJA Expiration vs. House Republican Tax Bill
| Year |
Filling Status |
Current Law (TCJA Expires) |
House Republican Tax Bill |
| 2025 |
Single |
$15,000 |
$16,000 |
| |
Married |
$30,000 |
$32,000 |
| 2026 |
Single |
$8,300 |
$16,550 |
| |
Married |
$16,600 |
$33,100 |
Source: Bipartisan Policy Center
Repeal of Personal Exemptions
While the higher standard deduction is a benefit for many, it comes with trade-offs. The bill permanently eliminates personal exemptions, which were set to return after the TCJA’s expiration. Personal exemptions provided additional deductions based on family size, valued at $5,300 in 2026 under prior law. This repeal is expected to increase revenue by $1.9 trillion from 2025 to 2034.
Child Tax Credit Changes
The child tax credit increases from $2,000 to $2,500 per child between 2025 and 2028 before reverting to the TCJA level. The credit will then adjust annually for inflation. By maintaining current income-based phaseout thresholds, middle- and high-income families will continue to benefit from these credits. Enhancements to the credit will cost $729 billion over the next decade.
Estate Tax Exemption
Starting in 2026, the estate tax exemption rises to $15 million, adjusted annually for inflation. High-net-worth taxpayers stand to benefit significantly from this change, which is projected to result in $212 billion in revenue losses.
2025-2026 Estate Tax Exemptions, TCJA Expiration vs. House Republican Tax Bill
| Year |
Filing Status |
Current Law (TCJA Expires) |
House Republican Tax Bill |
| 2025 |
Single |
$13.99 million |
$13.99 million |
| |
Married |
$27.98 million |
$27.98 million |
| 2026 |
Single |
$7.14 million |
$15 million |
| |
Married |
$14.28 million |
$30 million |
Source: Bipartisan Policy Center
Adjustments to Existing Tax Provisions
The tax bill introduces several revisions to existing deductions and tax frameworks.
Limit on Itemized Deductions
The bill permanently extends the TCJA’s repeal of the “Pease” limitation on itemized deductions. However, it adds new caps for taxpayers in the highest tax brackets, effectively reducing the value of state and local tax (SALT) deductions and other itemized deductions. For top earners, a $100 SALT deduction now results in a $35 tax savings instead of $37. This provision is expected to raise $41 billion over the next ten years.
SALT Deduction Adjustments
The cap on SALT deductions increases from $10,000 to $40,000 annually, providing relief to residents in high-tax states such as California and New York. Although this change benefits taxpayers in these regions, critics argue it falls short of adequately addressing their needs.
Alternative Minimum Tax Adjustments
The bill permanently extends the TCJA-era AMT exemption levels and adjusts them for inflation beginning in 2025. This maintains higher exemption thresholds while preventing the taxation of additional income that would have been subject to the AMT under prior law.
New Tax Provisions (2025–2028)
Several temporary measures aim to provide targeted relief over the next four years, including:
- Tipped Income and Bonus Pay Deductions: These deductions support workers in industries like ridesharing and hospitality. There is no limit on the amount of the deduction. However they are limited to taxpayers with an annual income of less than $160,000.
- Qualified Auto Loan Interest Deduction: Taxpayers may deduct up to $10,000 in interest on eligible auto loans for vehicles assembled in the U.S. The deduction phases out at 20% for individuals making more than $100,000 or married taxpayers making over $200,000.
- MAGA Accounts: These new savings accounts provide families with tax advantages. Contribution limits start at $5,000 annually, and a pilot program offers an initial $1,000 credit for U.S. citizens born during 2025–2028.
- Senior Tax Benefits: An additional $4,000 standard deduction is introduced for individuals aged 65 and older. Phaseouts begin at a 4% rate for incomes above $75,000 for individuals and $150,000 for married couples.
These provisions offer tax relief to families while supporting targeted groups, though they are limited in duration.
Special Provisions for Businesses
The bill provides numerous benefits for businesses, including extended 100% bonus depreciation until 2030, immediate expensing of R&D expenses (no amortization), and adjusted international tax rates. Notably, Opportunity Zone programs are revamped, with new rules that prioritize rural areas and offer a 30% bonus after five years of investment.
These business-focused provisions aim to foster investment, enhance innovation, and support economic growth while maintaining competitiveness on a global scale.
Impact of the Tax Bill on Income Groups
The Penn Wharton Budget Model highlights stark discrepancies in how the proposed tax changes affect income groups.
- Lower-Income Households: The bottom 20% of earners face an average income loss of $820 in 2026 due to cuts to programs like Medicaid and SNAP. This represents a 14.6% decline in after-tax and transfer income.
- Middle-Income Households: These taxpayers see modest benefits, with an average gain of $840 in 2026, primarily driven by expanded tax credits, including the child tax credit and standard deduction expansions.
- High-Income Households: The top 10% capture 70% of the total value of tax savings. These taxpayers benefit from reduced tax rates, expanded deductions, and adjustments to estate tax exemptions.
Small business owners also benefit substantially, particularly those leveraging the enhanced QBI deduction.
Impacts on Federal Revenue and Deficits
The bill’s tax cuts are projected to contribute $3.8 trillion to federal deficits over the next decade. To offset this revenue loss, spending cuts totaling $1.5 trillion target Medicaid, SNAP, and federal student loan programs.
Medicaid & Health Insurance
Changes include work requirements for able-bodied adults without dependents, biannual eligibility checks, reduced Federal Medical Assistance Percentage (FMAP) for states insuring undocumented immigrants, and increased state cost-sharing. Changes to health insurance marketplaces aim to reduce Medicaid participation further, collectively saving $900 billion over ten years.
SNAP Reductions
Reductions totaling $290 billion shift costs to states and tighten eligibility requirements with additional mandates such as work documentation and limited Thrifty Food Plan growth. While these changes contribute to deficit reduction, there is concern they may impose operational and financial challenges on states.
While the House Republican Tax Bill 2025 aims to reduce tax burdens and stimulate economic growth, it faces scrutiny for increasing deficits and concentrating benefits among top earners. Debates around fiscal responsibility are likely to continue as the Senate takes up the legislation.
To prepare for these changes, contact an LTax tax advisor today. With expert guidance, our team can help you adapt your financial strategies to evolving tax policies and achieve your long-term goals.
LEGAL OR TAX: The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent engagement agreement with a licensed attorney or tax professional.