Article | One Big Beautiful Bill Act

Key individual, trust and estate tax provisions in the Senate-approved bill

Jul 02, 2025 · Authored by Jessica Jeane, Michael Lum, Andrew Whitehair

Outlined below is initial analysis and important takeaways on the Senate-approved One Big Beautiful Bill Act.

Tax rates and bracket extensions

Current Tax Cuts and Jobs Act (TCJA) tax rates and brackets (inflation adjusted) would be made permanent.

• Not included: A millionaires’ tax or other increase in the top marginal rate
• Planning: The proposal retains TCJA rates and brackets, so rate planning is limited.
• House bill: No major differences

Estate and gift tax

Permanently increases the gift and estate tax exemptions to $15 million beginning in 2026, with inflation increases annually thereafter.

• Not included: A repeal of the estate tax, which appears unlikely in the near future
• Planning: Consider making lifetime gifts to use the approximately $1 million boost in the exemption next year
• House bill: No differences

Itemized deduction limitation

TCJA repeal of the Pease limitation is made permanent, but a new overall limit on itemized deductions effectively caps the benefit from itemized deductions at 35%, which should only impact taxpayers in the highest tax bracket.

• Planning: For taxpayers in the 37% bracket, their marginal tax benefit from charitable deductions will be 35%; consider accelerating charitable deductions into 2025.
• House bill: The limitation formula is slightly less favorable, reducing the tax benefit from itemized deductions by approximately 2-3%.

Charitable contribution deduction floor

Charitable contribution deduction is reduced by an amount equal to 0.5% of adjusted gross income (AGI) for tax years after 2025.

• Planning: Especially in context of the overall itemized deduction limitation, this provision will further reduce the benefit from charitable contributions; consider accelerating charitable deductions into 2025.
• House bill: Does not include this provision

SALT cap

TCJA limitations on state and local tax (SALT) deductions remain, but the bill increases the deduction to $20,000 (married filing separately [MFS]) and $40,000 (all other filers). The deduction phases down for taxpayers with modified adjusted gross incomes (MAGIs) exceeding $250,000 (MFS) and $500,000 (all other filers) but not below $5,000 (MFS) or $10,000 (all other filers). Starting in 2026, the deduction cap and phase-down threshold increase 1% annually through 2029, before reverting to $10,000 for the 2030 tax year.

• Retroactive: Consider whether a taxpayer would benefit from making 2025 Q4 state income taxes before year-end 2025
• Pass- through entity tax (PTET): The earlier version of the Senate bill proposed various changes intended to reduce or eliminate PTET workarounds. The Senate-approved bill includes no PTET limitations.
• House bill: No future reversion back to the $10,000 cap. It increases the cap and thresholds annually by 1% through 2033. House proposal retains PTET workaround for qualified trade or businesses but effectively eliminates it for specified service trades or businesses (SSTBs).

Enhanced standard deduction/personal exemption elimination

Makes permanent the larger TCJA standard deduction and permanently eliminates personal exemptions. The standard deduction for 2025 would be $31,500 (married filing jointly [MFJ]), $23,625 (head of household [HOH]) and $15,750 (other filers).

• House bill: Provides for a temporary increase in the standard deduction for tax years 2025-2028 which makes the house bill slightly more generous

Enhanced senior citizen deduction

Taxpayers who have attained age 65 in tax years 2025 through 2028 receive an additional $6,000 “temporary senior deduction,” which is phased out at MAGIs over $150,000 (MFJ) and $75,000 (other filers). The amount is allowed for itemizers and non-itemizers and is not indexed for inflation.

• Retroactive: This provision would be effective for the 2025 tax year.
• Consider: Social Security benefits remain taxable, but this provision was introduced as a partial fulfillment of President Trump’s campaign pledge.
• House Bill: Only provides for a $4,000 deduction

Enhanced child tax credit (CTC)

Permanently increases the nonrefundable CTC to $2,200 starting with tax year 2025 and indexes the amount for inflation for tax years after 2025. TCJA’s CTC phaseouts of $200,000/$400,000 (single/MFJ respectively) are made permanent, but the bill does not index them for inflation.

• House bill: Also makes TCJA CTC provisions permanent, but provides for a temporary $2,500 CTC for tax years 2025 through 2028 reverting to $2,000 afterwards

Alternative minimum tax (AMT)

Makes permanent the TCJA AMT exemption amounts and phaseout thresholds but reverts the exemption phaseout thresholds to 2018 levels of $1 million (MFJ) and $500,000 (other filers).

• Consider: Resolves the uncertainty regarding the possible return of AMT, which could impact taxpayers holding incentive stock options (ISOs) or shares from an ISO exercise
• House bill: No differences

Qualified mortgage interest deduction limitation

Makes permanent the $750,000 ($375,000 if MFS) limit on qualified mortgage interest and the elimination of home equity interest.

• House bill: No differences

Deductible car loan interest

For tax years 2025 through 2028, the proposal allows a deduction for up to $10,000 of new car loan interest on U.S. assembled vehicles. Only new car loans taken out or refinanced (if it doesn’t add to the balance of the original loan) in 2025-2028 are eligible. The deduction phases out for MAGI exceeding $200,000 (MFJ) and $100,000 (other filers) (fully eliminated at $250,000 [MFJ] and $150,000 [other filers]). Deduction is available for non-itemizers.

• Retroactive: This provision is retroactive to the beginning of 2025.
• House bill: No major differences

Casualty losses

Makes permanent the TCJA limitation on deductions for personal casualty losses but adds an exception for state-declared disasters.

• Consider: Whether the taxpayer can still deduct personal casualty losses resulting from a federally declared disaster area or another provision
• House bill: Similar except no exception for state-declared disasters

Miscellaneous 2% expenses

Makes permanent TCJA’s elimination of miscellaneous 2% expenses.

• Consider: Methods for converting nondeductible investment expenses into deductible expenses such as by using a lender management structure for family offices
• House bill: No major differences

Charitable deductions for non-itemizers

Resurrects and increases the pandemic-era above-the-line charitable deduction for non-itemizers. Taxpayers can deduct $2,000 (MFJ) or $1,000 (other filers). Effective for tax year 2026 and beyond.

• House bill: Less generous $300/$150 amounts, but it is retroactive for 2025

Scholarship granting organization (SGO) credits

For tax years starting in 2027, makes available an annual $1,700 tax credit for contributions of cash or marketable securities to SGOs. SGOs are organizations that provide scholarships for qualified elementary and secondary eligible students.

• House bill: Caps annual available credits at $5 billion, makes credits available temporarily for tax years 2026 through 2029 and allows a much more generous credit equal to the greater of 10% of AGI or $5,000
• Consider: The house proposal credits will operate on a first-come, first-serve basis, so interested taxpayers should contribute to qualifying SGOs early in 2026.
• Planning: For taxpayers making a qualifying gift of appreciated stock, this essentially allows them to lock in their pre-tax rate of return. Subject to AGI limits, this provides a 100% credit for the fair market value of the stock and avoids gain on the transfer.

Carried interest

The proposal doesn’t include any additional limitations on carried interest.

• House bill: The house bill also doesn’t include any carried interest provisions.

Trump child accounts

A new tax-favored account similar to an individual retirement account (IRA) is created for U.S. citizens under age 18. The federal government will contribute $1,000 to an account for every U.S. citizen born during 2025 through 2028. Additionally, contributions of up to $5,000 (inflation adjusted) per year can be made from birth through age 17, with no distributions allowed until age 18. Distributions are subject to the rules applicable to traditional IRAs. Investment options are limited to U.S. equity index investments with expense ratios not exceeding 0.1%. The account provides for an employer exclusion for contributions up to $2,500 (inflation adjusted). Distributions can be taken under the normal traditional IRA rules with limited pre-59 ½ distributions allowed for qualified college expenses and first-time home purchases.

• Planning: The Senate version of Trump child accounts is much more compelling and would allow children to get a substantial head start on retirement saving, while providing funding for major life events
• House bill: Much more restrictive distributions. The beneficiary is limited to withdrawing an aggregate 50% of the account from age 18 through age 24, has unrestricted access at age 25 and must withdraw all remaining assets at age 31. Distributions for qualified expenses (education, small business/farm startup, first-time home purchase) are taxed at capital gains rates and non-qualified distributions are taxed at ordinary rates (with a 10% penalty if distributed before age 31). The bill does not provide for employer contributions and prohibits accounts from being established once a beneficiary attains age eight. Traditional custodial accounts or 529 plans are likely better options, offering more flexibility or better tax benefits.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.