Tax Cut: What You Need to Know Now

A ‘Big, Beautiful Bill’
How are the Tax Cuts Paid For?

The House Ways and Means Committee has officially approved the tax section of President Trump’s economic plan. This plan is often called the “one big, beautiful bill.” This development represents a pivotal legislative milestone in the journey toward a comprehensive fiscal reconciliation package that aims to reshape the economic landscape. Following this approval, the legislation will move to the House Budget Committee. There, it will face more scrutiny and refinement. During this critical phase, various committees will propose tax and spending measures. These proposals will be meticulously integrated into a single, cohesive final version. This combination is essential because it will ensure that the different parts of the economic plan work together. It will align with the main fiscal goals. Once this final version is completed, it will be presented for a vote to the full House. This marks another important step in the legislative process, which could greatly impact the nation’s economy.

The proposed tax overhaul revives and expands the Tax Cuts and Jobs Act (TCJA) of 2017. This change is expected to reshape the American tax code for the next decade. The situation also places the U.S. economy in a position for a politically charged fiscal change. This change could impact households, businesses, and global markets. The Key of the bill aims to make the personal income tax cuts from the TCJA permanent. These cuts are set to expire at the end of this year. If they expire, American households would face a $3.4 trillion tax increase. Without this extension, experts warn the U.S. economy could face a recession, compounded by existing tariff pressures.

Other important aspects include:

Permanent personal tax rate reductions
Expanded standard deduction ($1,000 more for single filers; $2,000 for joint filers)
Deductibility of auto loan interest
Exemptions for taxes on tips and overtime pay
Enhanced tax deductions for seniors over 65
A more generous estate and gift tax exemption
Many of these personal tax advantages will expire in 2028 unless they are extended once more.

A ‘Big, Beautiful Bill’

The debated State and Local Tax (SALT) deduction cap has been increased. It now rises from $10,000 to $30,000. This change applies to single filers earning less than $200,000 and couples earning under $400,000. The deduction then gradually phases down for higher earners. Meanwhile, the Child Tax Credit—set to expire in 2025—is made permanent, with a temporary boost to $2,500 through 2028.

The bill permanently increases the Section 199A pass-through deduction from 20% to 23%. This change benefits small business owners and independent contractors.

On the business side, the legislation extends multiple expiring TCJA provisions, including:

100% bonus depreciation
Research & development expensing
Interest deduction rules
Select international tax provisions

However, these corporate tax cuts are not permanent—they’re extended for just four years. Importantly, large corporations will not receive additional tax breaks, signaling a political compromise to limit deficit exposure.

How are the Tax Cuts Paid For?

To address expected revenue losses from proposed tax cuts, lawmakers have introduced various offsetting measures to balance the budget. Among these measures are several important initiatives. One is the gradual phaseout of clean energy tax credits from the Inflation Reduction Act. This phaseout is scheduled to be fully implemented by 2031. There is also a proposal to raise tax rates on income earned abroad. This could lead to more revenue from foreign investments.

The plan also includes a cut in the premium tax credits linked to the Affordable Care Act. This change will impact many individuals and families who depend on these subsidies for healthcare coverage. Another important part of the proposal is that it excludes undocumented immigrants from certain tax credits. This decision has led to significant debate about its effects on social equity and economic participation.

The Joint Committee on Taxation (JCT) has projected that the proposed tax cuts will significantly increase the federal deficit. By the year 2035, this increase is estimated to reach around $3.8 trillion, based on current law. Senate Budget Chairman Lindsey Graham has indicated that the budget baseline will rely on “current policy.” This approach differs from using current law as the basis. This strategic move allows Republican lawmakers to argue that the proposed extensions do not increase the deficit. This approach helps them avoid Senate budget rules, including the Byrd Rule, which regulates the reconciliation process.

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