Since the U.S. Senate first unveiled its version of the GOP’s “Big Beautiful Bill,” several key changes emerged that set it apart from the U.S. House of Representatives' earlier proposal.
These differences, some of which were surprising, are already fueling debate in Washington and could have wide-reaching effects for families, businesses, and even nonprofit organizations.
And...it's worth noting that these proposals come as new polling from PEW Research suggests many U.S. taxpayers have doubts about the bill, with 54% of respondents saying the mega legislation will have a mostly negative effect.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Here's more of what you need to know.
Senate tax bill proposals
Like the House GOP version of Trump’s One Big Beautiful Bill Act, the Senate GOP's proposed bill proposes several tax changes and policy shifts that could impact taxpayers for years to come.
Some of the proposed Senate changes are somewhat surprising, from a more modest child tax credit increase to a larger charitable deduction and timing changes for some energy policy provisions.
These proposals set the stage for tough negotiations with the House as the massive reconciliation bill progresses through the legislative process in Congress.
Based on the latest legislative text, here are five key changes proposed in the Senate GOP tax bill.
1. More modest Child Tax Credit — and sharper Medicaid cuts
The federal child tax credit is one closely watched provision when it comes to tax reform. While Republicans in both chambers have proposed increasing the credit, the Senate’s version is notably less generous than the House’s.
- According to a draft of the Senate bill, the maximum child tax credit would be permanently set at $2,200 per child starting in 2025, with adjustments for inflation after.
- By contrast, the House bill would raise the credit to $2,500 per child for four years before reverting to $2,000, also indexed for inflation.
Some policy analysts note that many children could be left out, since neither version offers relief to families with low incomes who owe no federal income tax.
However, the Senate's decision to opt for a lower amount is a notable policy choice since past expansions of the CTC have been credited with reducing child poverty.
The Senate’s tax bill also would hit Medicaid harder than the House version, with a combination of deeper funding reductions and stricter eligibility policies.
The Senate proposal would slash federal Medicaid support by billions more than the House bill, with particularly steep impacts on states that expanded Medicaid under the Affordable Care Act (ACA).
Some health policy experts warn that these and other changes could result in millions more Americans losing Medicaid, especially among families with lower incomes and those in rural areas.
2. Permanent business tax breaks and a lower cap on State and Local Tax (SALT) deductions
The Senate proposes to make certain business-related tax breaks permanent — an approach that contrasts with the House’s temporary extensions.
That includes provisions like 100% bonus depreciation and expanded deductions for business interest, which are popular with industry groups but add to the long-term cost of the already expensive “big bill.”
At the same time, the Senate version initially maintained a $10,000 cap on federal deductions for state and local taxes (SALT), far lower than the $40,000 cap included in the House GOP version of the bill.
Some saw the move as a placeholder for negotiation. It quickly triggered backlash from some House Republicans representing high-tax states, whose constituents would benefit from a higher SALT cap.
*The provision was later modified to temporarily raise the SALT cap to $40,000 with annual increases for 2025-2029, at which time it would revert to the $10,000 limit in 2030. Some pass-through businesses could bypass the cap.
Related: SALT Cap Could Hurt Top 'Hidden Home Cost'
3. Larger above-the-line charitable deduction for non-itemizers
In an unexpected shift, the Senate bill expands the above-the-line charitable deduction for taxpayers who don’t itemize.
- The House bill would allow a deduction of up to $150 for individuals and $300 for married couples.
- The Senate proposal, however, would increase that to $1,000 for individuals and $2,000 for married couples.
Some nonprofit advocates have pushed for expanded tax incentives to boost donations at a time when many charitable organizations are facing financial stress. However, some policy analysts say the “big bill” provisions complicate charitable giving rules.
4. A larger bonus standard deduction for older adults
As Kiplinger has reported, the Senate bill would temporarily add a $6,000 special bonus tax deduction for those 65 and older, more than the $4,000 proposed in the House version.
This deduction would be available to itemizers and those taking the standard deduction, would stack on top of the existing extra standard deduction for those 65 and older, and begin to phase out at incomes above $75,000 for individuals or $150,000 for couples.
GOP lawmakers say the change is designed to help older taxpayers manage rising living costs.
For more information, see Senate Seeks $6,000 Bonus Tax Deduction for Those Age 65 and Older.
5. Rollback of clean energy credits — with some flexibility
Both the House and Senate bills propose rolling back many of the clean energy tax credits enacted under President Biden’s Inflation Reduction Act (IRA).
- However, the Senate GOP version would phase out incentives for wind and solar energy at a slower pace than the House, allowing more projects to qualify before the credits expire.
- The Senate bill would also preserve some incentives for geothermal, nuclear, and hydropower projects.
According to an NPR report, this compromise is already eliciting mixed reactions from industry groups and environmental advocates.
The One Big Beautiful Bill Act in the Senate: Bottom line
Overall, the House and Senate versions of the “Big Beautiful Bill” share broad goals like making most Trump-era tax cuts permanent, cutting non-military spending, and boosting border and defense funding. Still, the proposals differ in some key aspects.
As mentioned, the House bill features larger, temporary tax breaks, like a higher child tax credit and a more generous SALT deduction. It would also allow more in temporary deductions for tips and overtime pay.
In contrast, the Senate bill opts for smaller, permanent tax cuts, keeps the SALT deduction capped at $10,000, and would limit tip and overtime deductions.
Regarding Medicaid, the Senate would impose deeper funding cuts and stricter eligibility rules.
Some estimates project the House bill could add anywhere from $3.8 trillion to $5.3 trillion to the deficit over a decade, while the Senate version, with more permanent provisions and a slower phase-out of green energy credits, would potentially cost even more.
Also, the House would raise the debt ceiling by $4 trillion, whereas the Senate proposes a $5 trillion increase.
But stay tuned as GOP lawmakers in both chambers work toward a final version of Trump’s big reconciliation bill, which they say they still hope to pass by July 4.
Related
-
‘I Play Pickleball in Retirement.’ Is It HSA-Eligible?Retirement Tax Staying active after you retire may be easier with these HSA expenses. But there’s a big catch.
-
What New Tariffs Mean for Car ShoppersThe Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
What to Know About New Medicaid Cuts: Is Your Local Hospital Closing Soon?Tax Policy Trump’s ‘One Big Beautiful Bill’ is now law, and rural hospitals across the U.S. are on the chopping block.
-
IRS Watchdog: Three Problems the IRS Must Address in 2025IRS The tax season is over, but new changes to the IRS can pose risks to your taxpayer experience.
-
Elon Musk and Most Taxpayers Don't Like What's in Trump's 'Big Beautiful Bill'Tax Policy President Trump is betting big on his newest tax cuts, signed into law on July 4. But not everyone is on board.
-
'Unprecedented' Private School Voucher Tax Credit in Trump's MegabillTax Credits The so-called ‘One Big Beautiful Bill’ is now law, and one provision calls for a major tax break for private school donors.
-
2025 SALT Cap Could Hurt Top 'Hidden Home Cost'Tax Deductions The GOP tax bill could make hidden homeowner costs worse for you. Here’s how.
-
No Social Security Tax Changes in Trump’s 'Big Bill'? What Retirees Need to KnowTax Policy Eliminating taxes on Social Security benefits is missing from President Trump’s tax overhaul. Here’s why and what an alternative offering could mean for retirement taxes.
-
$6,000 'Bonus' Tax Deduction Approved for Those Age 65 and OlderTax Reform Trump’s ‘big bill’ contains a larger 2025 bonus tax deduction for older adults. How will it work?
-
Don't Miss These Four Tax Breaks for Americans Living Abroad in 2025International Tax U.S. expats can reduce their tax burden by taking advantage of a handful of tax credits and deductions.
