Important Caveat: The fate of Trump’s comprehensive tax and spending package remains uncertain. The legislative process surrounding the 2025 budget and tax bill is ongoing. The provisions discussed in this article reflect the most current version passed by the House of Representatives but remain subject to change as the bill moves through the Senate and reconciliation process. We recommend consulting with your tax advisor before making any decisions based on the proposed legislation.

Although the legislation is still evolving, many are eager to see what’s currently on the table. Here’s a snapshot of the key individual tax provisions in the House’s proposed legislation:

Quick Takeaways

• The House bill would extend many TCJA provisions set to expire in 2025.
• It proposes new tax breaks, including exemptions for tips and auto loan interest.
• Key provisions would expire at the end of 2028 unless extended again.
• Final tax changes are not yet certain; the Senate has its own version.
• Taxpayers should stay alert for planning opportunities as the law evolves.

Income Tax Rates and Brackets

Current law: For 2018 through 2025, the TCJA retains seven tax rate brackets, but six of the rates are lower than under prior law. The top marginal rate was temporarily reduced from 39.6% to 37%. Here are the individual rates and brackets for 2025:

Without congressional action, starting in 2026, the rates and brackets will revert to those available under prior legislation with inflation adjustments.

Proposed changes: The House bill would permanently extend the individual tax rates and brackets under the TCJA, keeping the top rate at 37%. The brackets would continue to be adjusted annually for inflation. 

Standard Deduction

Current law: For 2018 through 2025, the TCJA suspends personal exemptions, but it nearly doubles the standard deduction. For 2025, the inflation-adjusted standard deduction is:

• $15,000 for single taxpayers,
• $22,500 for married taxpayers who file jointly, and
• $30,000 for heads of households.

Taxpayers who are blind or age 65 or older can claim an additional standard deduction of $2,000 ($1,600 if married) for 2025. 

Without congressional action, starting in 2026, personal exemptions will be reinstated, and the standard deduction will revert to the levels available under prior law with inflation adjustments. 

Proposed changes: The House bill would permanently suspend personal exemptions and extend the higher standard deduction. In addition, for 2025 through 2028, it would temporarily increase the standard deduction by:

• $1,000 for single taxpayers,
• $2,000 for married taxpayers who file jointly, and
• $1,500 for heads of households.

The standard deduction would continue to be adjusted annually for inflation.

Estate Tax Lifetime Exemption

Current law: The federal estate tax currently applies to estates exceeding $13.99 million for individuals and $27.98 million for married couples. Before the TCJA, the exemption thresholds were roughly half those amounts.

Proposed changes: Under the House bill, the higher estate tax exemption amounts would not only be made permanent but also increased starting in 2026:

• Single filers could exclude up to $15 million from estate taxes.
• Married couples filing jointly could be exempt from up to $30 million.

Child Tax Credit 

Current law: For 2018 through 2025, the TCJA increases the Child Tax Credit from $1,000 to $2,000 for each dependent child under age 17 at year end. Up to $1,500 of the credit is refundable. The TCJA also increases the phaseout levels for this credit, allowing more taxpayers to benefit. For 2025, the credit phases out at the following income ranges: 

• $200,000 to $240,000 for single taxpayers and heads of households, and
• $400,000 to $440,000 for married taxpayers who file jointly.

Additionally, for 2018 through 2025, the TCJA provides a $500 credit for other qualifying dependents. It’s subject to the same income-based phaseouts as the Child Tax Credit and can be claimed for a qualifying dependent child over the age limit or a qualifying dependent elderly parent.

Without congressional action, starting in 2026, the Child Tax Credit will be only $1,000, the credit for other dependents will be eliminated and the income-based phaseouts will drop significantly.

Proposed changes: The House bill would temporarily increase the Child Tax Credit to $2,500 for 2025 through 2028. After 2028, the credit would be permanently set at the current amount ($2,000) with inflation adjustments. It would still be partially refundable and subject to income-based phaseouts. The bill adds a requirement for Social Security numbers to claim the credit. 

The House bill doesn’t mention the $500 credit for other qualifying dependents. So, that break will likely expire after 2025.

Itemized Deduction for State and Local Taxes

Current law: For 2018 through 2025, the TCJA limits the deduction for state and local income and property taxes (SALT) to a combined total of $10,000 ($5,000 for married people who file separately). Alternatively, you can opt to deduct state and local general sales taxes instead of state and local income taxes. Foreign real property taxes aren’t deductible under the TCJA.

Without congressional action, starting in 2026, taxpayers who itemize will be allowed to deduct an unlimited amount of personal state and local income and property taxes (or general sales taxes instead of state and local income taxes). 

Proposed changes: Starting in 2026, the House bill would permanently increase the SALT cap to $40,000 for taxpayers with incomes under $500,000 ($200,000 for married couples who file separately). The SALT limit would decrease by 20 cents for every dollar over the limit, not to fall below the current cap of $10,000 ($5,000 for married couples who file separately). 

The bill would also eliminate certain SALT cap workarounds for owners of pass-through entities, such as partnerships and S corporations. 

Additional Tax Relief Measures under Consideration

In addition to extending certain soon-to-expire TCJA provisions, the House bill would introduce several new tax breaks for individuals, including:

Exemptions for tips and overtime

Starting in 2025, qualified cash tips and overtime pay would temporarily be exempt from federal income tax for workers with earnings under the annual threshold for highly compensated employees ($160,000 for 2025). 

The tip-income exemption would apply only to occupations that “traditionally and customarily” received tips on or before December 31, 2024. Both exemptions would require Social Security numbers and be available to both people who itemize deductions and those who claim the standard deduction. 

Expanded standard deduction for seniors

On the campaign trail, President Trump promised to eliminate federal income taxes on Social Security benefits. Instead of providing an exemption for this income, the House bill would temporarily expand the standard deduction available to people age 65 and older, starting in 2025. 

The “bonus deduction” amount would be $4,000, subject to phaseouts for seniors earning more than $75,000 ($150,000 for married couples). Seniors who itemize wouldn’t be allowed to claim this bonus deduction. This provision would require Social Security numbers.

Auto loan interest deduction

Starting in 2025, the House bill would allow a deduction of up to $10,000 for personal loan interest incurred to purchase qualified domestically assembled passenger vehicles. This provision generally covers cars, minivans, vans, sports utility vehicles, pickup trucks, motorcycles, all-terrain vehicles, trailers, campers and recreational vehicles.

The deduction would be available to both people who itemize deductions and those who claim the standard deduction. However, it would be phased out for people earning more than $100,000 ($200,000 for married couples). This provision has several restrictions. For instance, commercial vehicle loans, lease financing and related-party loans would be specifically excluded.

MAGA accounts

The original MAGA accounts (money accounts for growth and advancement) get a name change.  They will now be called "Trump accounts." Eligible children born after December 31, 2024, and before January 1, 2029, would receive a one-time deposit of $1,000 from the U.S. government. Starting in 2026, annual contributions would be capped at $5,000 per account (adjusted annually for inflation). 

Distributions from Trump accounts would be subject to the following age-based restrictions:

• Before the account beneficiary turns 18, no withdrawals will be allowed.
• Between the ages of 18 and 24, an account beneficiary can’t withdraw more than half the account value.
• After the account beneficiary turns 31, the account will terminate, unless it’s rolled over into another account.

Trump account contributions would be made with after-tax dollars. Funds would grow tax-free, and withdrawals of principal would be tax-free. 

Withdrawals of earnings would be subject to long-term capital gains rates if used for qualified expenses, such as higher education costs, post-secondary credentials, small business-related expenses tied to certain loans and first-time home purchases. 

Otherwise, withdrawals of earnings would be subject to ordinary income tax rates, plus a 10% penalty if the account beneficiary is under age 30. To qualify, a child must be a U.S. citizen at birth and have a Social Security number.

Important: All these new tax breaks would expire at the end of 2028 under the House bill.

FAQs: The One Big Beautiful Bill

1. Will the lower tax rates from the TCJA be extended?
   Possibly. The House bill proposes an extension, but final approval is uncertain.
2. Are tips and overtime really going to be tax-free?
   For some workers, yes, if the bill passes, but only temporarily and only if they meet specific criteria.
3. What happens to the Child Tax Credit in 2026?
   It would revert to $1,000 per child, and the credit for other dependents would disappear unless extended.
4. Are MAGA accounts like 529 plans?
   They’re similar but have more age-based limits and broader potential uses beyond education.

Stay Tuned- This overview captures just a portion of the 1,100+ pages of tax provisions included in the House budget reconciliation bill. The House and Senate still need to negotiate a unified bill, and political disagreements — especially over issues like SALT deductions and spending levels — could lead to revisions or delays.