On June 16, 2025, the Senate Finance Committee released its version of the “One Big Beautiful Bill,” a sprawling tax package that—like its House counterpart—proposes to lock in many expiring provisions from the Tax Cuts and Jobs Act (TCJA) and add new taxpayer-friendly incentives. While the two versions share broad similarities, the Senate version takes a more cautious approach in some areas and reflects different legislative priorities.
TCJA Extensions with Key Differences
Like the House version, the Senate bill seeks to make the TCJA’s lower individual tax rates and higher standard deduction permanent. But rather than temporarily increasing the standard deduction between 2025 and 2028, the Senate version increases the base deduction starting in 2026 and indexes it for inflation. For example, the standard deduction for joint filers would rise to $32,000 in 2026.
Both bills extend other TCJA provisions, including the repeal of personal exemptions, the expansion of the alternative minimum tax exemption, and limitations on itemized deductions. However, the Senate bill adds a $6,000 temporary deduction for seniors (age 65+) between 2025 and 2028, whereas the House bill offers a $4,000 addition to the standard deduction for seniors during that time.
SALT Deduction: A Major Divergence
A clear point of divergence between the two bills is the treatment of the state and local tax (SALT) deduction. The House bill raises the cap to $40,000 for 2025, phasing it out at higher incomes and increasing the cap annually through 2033. In contrast, the Senate bill simply makes the existing $10,000 cap permanent and curbs some common workarounds. Senate negotiators have characterized this as a placeholder for future negotiations, as the $10,000 cap is unlikely to pass muster with House lawmakers from high-tax states.
Individual Tax Benefits: Limits and Phaseouts
Both versions introduce new deductions for tip and overtime income, available to non-itemizers. However, the Senate version caps the tip deduction at $25,000 and the overtime deduction at $12,500, with both phasing out for higher-income taxpayers. These caps and phaseouts reflect the Senate’s emphasis on cost control.
The Senate version, like the House version, allows a deduction for auto loan interest—up to $10,000 per year for vehicles assembled in the United States and purchased after 2024. This provision is not subject to income caps in either version.
Child Tax Credit and Family Provisions
The Senate bill boosts the child tax credit from $2,000 to $2,200, with inflation indexing and no cap on the refundable portion. This contrasts with the House version, which temporarily raises the credit to $2,500 (2025–2028) but caps the refundable portion at $1,400.
Both bills expand 529 plans to include home schooling and K–12 expenses and reintroduce a charitable deduction for non-itemizers, echoing pandemic-era rules.
Business Provisions and Bonus Depreciation
Both bills seek to make 100% bonus depreciation permanent starting in 2025, with the Senate version excluding special allowances for agriculture and chemical production that appear in the House bill.
The Senate version also reinstates the full deduction for domestic research and experimental costs permanently (rather than through 2029, as in the House version) and allows small businesses to apply the change retroactively to 2022.
While both bills make the qualified business income (QBI) deduction permanent, the Senate version maintains the current 20% deduction rate, in contrast to the House’s proposed increase to 23%.
International and Corporate Tax Changes
On international tax provisions, both bills extend key TCJA policies like the FDII and GILTI deductions and the base erosion minimum tax. But the Senate version adjusts the rates less aggressively and introduces more technical changes, including to the treatment of controlled foreign corporation income and foreign tax credits.
Energy Tax Credits Phased Out Sooner
To offset the cost of the bill, both versions propose to scale back or eliminate many green energy tax credits introduced by the Inflation Reduction Act. The Senate bill accelerates this rollback—terminating many consumer-facing credits, such as those for clean vehicle purchases, within 90 days of enactment.
IRS Administration and Enforcement
Both bills propose to end the IRS Direct File program. However, the Senate version does not include the House’s proposed mandate for the IRS to use artificial intelligence to reduce improper payments. The Senate version also imposes a lower penalty structure for promoters of fraudulent employee retention credit (ERC) schemes.
Looking Ahead
While the Senate bill mirrors the House version in many areas, the differences—particularly around the SALT cap, income-based phaseouts, and energy credit timelines—will require extensive negotiation. GOP leadership has set a self-imposed deadline of July 4 to finalize the bill and send it to the President’s desk, but many lawmakers remain skeptical that the timeline is achievable. As both chambers move toward reconciliation, tax professionals and taxpayers alike should prepare for further changes. The final bill could shift depending on negotiations over key cost provisions and political priorities.
Nick Lagoditz, CPA, joined ARB in 2016 as an associate and became a tax manager in 2022. He provides tax preparation and business advisory services, with a focus on partnerships, real estate professionals, and construction businesses. Previous to ARB, Nick worked at a large international firm for nearly two years.
