What Has Changed in Senate Finance Committee Version of ‘One Big Beautiful Bill’

Senate Republicans released their version of “One Big Beautiful Bill,” and as expected, changes were made from the version that was approved by the House just before Memorial Day. Leaders of our Tax Practice have reviewed the updates in the latest version of the bill and have outlined relevant items that have been altered from the House version.

With all pending legislation, it is important to remember that any of the provisions within these bills may be changed or eliminated. In this case, the Senate would have to agree on its final version of the bill and send it back to the House for final approval, which could present another opportunity for opposition. 

Critical provisions for business owners remain intact

Extensions of three business-friendly tax breaks from the Tax Cuts and Jobs Act, remain in the bill including:

• 100% bonus depreciation – scheduled to fully expire in 2027.
• Capitalization and deduction of research and development expenses, including machinery purchases -TCJA mandated that from 2022 onward, firms amortize R&D over 5 years, undoing full expensing.
• Increased interest deductions - reinstating the EBITDA-based limitation on business interest deductions.

These provisions were a key component of the House version of the bill and the recently released version of the bill from the Senate Finance Committee permanently extends all three of those provisions.

These extensions have been a focal point for the Trump administration from day one, and they remain intact in the latest version of the bill.

Limitations on tax exemptions for tipped income and overtime income

The elimination of taxes on qualified tips and overtime wages was introduced in the House-approved version and has been kept in the latest version.

• Updated language has been added to include a $25,000 cap on the amount of qualified tips and a $12,500 ($25,000 for married couples filing jointly) cap on overtime wages that would be exempt. 

  • These exemptions phase out above $150,000 individual income and $300,000 for married couples filing jointly. 

These provisions satisfy one of the Trump campaign's most prominent promises to tipped workers and those who work significant overtime.

Changes to Child Tax Credit and bonus deduction for senior citizens

Both the Child Tax Credit and a temporary Bonus Standard Deductions for seniors received notable increases in the Senate version as compared to the House.

• The Child Tax Credit would increase to a maximum $2,200 per child (up from $2,000 in the House version) and would be made permanent and adjusted for inflation in later years. 

  • The House version raised the maximum to $2,500 initially but lowered it after 2028

• The Bonus Standard Deduction for seniors was set at $4,000 in the House version, and was altered by the Senate to cap out at $6,000 to offset Social Security taxes paid

There was a mention of the temporary Bonus Standard Deduction for senior citizens in the earlier version, but the Senate version makes it clearer and applies a limit, checking another box from President Trump’s campaign by offsetting the taxes paid rather than completely eliminating tax on Social Security income. 

SALT deduction limits and Medicaid cuts

Key points of contention remain within the limit on the state and local tax (SALT) deductions and the extent of Medicaid cuts.

• The House version of the bill included a $40,000 cap on SALT deductions, a significant increase from the current $10,000 limit, but the Senate has proposed an extension of the current $10,000 limit
  • Being one of the most problematic and controversial provisions in the bill, lawmakers have called the $10,000 a starting point for negotiations
• Republican senators have proposed nearly halving the current 6% provider tax that states use to help fund their share of Medicaid costs to 3.5% by 2031, sparking outrage from certain parties and threats to withdraw support

These two items have been the most talked-about provisions since the legislation was first proposed and continue to be major sticking points. As previously stated, both of these provisions could be changed or eliminated pending negotiations that take place between now and the finalized bill that is sent to President Trump for signature.

Ample work remains ahead of Fourth of July recess

Discussion still remains on the bill’s impact on the federal deficit, a potential debt ceiling increase, phasing out of Inflation Reduction Act credits, and plenty of other matters. Supporters of the bill have been adamant in their desire to have the bill finalized before the Fourth of July recess, even stating that they would hold lawmakers through the break to get a deal done.

We will continue to monitor any updates and share all relevant information on matters that could impact your business. Please fill out the form on this page to connect with a member of our Tax Practice to start planning for various scenarios that could play out as the final form of this legislation becomes clearer.