Written by Robin Bodine, CPA
The proposed Senate version of 2025 tax reform includes sweeping tax reform proposals drafted by the Senate Finance Committee. These provisions diverge in key areas from the House-passed version of the bill. In this blog post, we break down and compare the most impactful individual, business, and energy-related tax provisions and what they mean for taxpayers, businesses, and investors.
Both versions of the bill aim to make the 2017 Tax Cuts and Jobs Act (TCJA) brackets permanent. The Senate version slightly enhances the lower brackets by adding an extra year of inflation protection. It also begins reintroducing personal exemptions after 2028.
|
Provision |
House Version |
Senate Version |
|
Tax Brackets |
Permanently extends TCJA brackets |
Similar, plus an extra year of inflation adjustment |
|
Standard Deduction |
$15,000 (single), $30,000 (joint) |
$16,000 (single), $32,000 (joint) |
|
Personal Exemption |
$0 (permanent repeal) |
Same provision |
|
Car Loan Interest |
2025 to 2028 allows a deduction up to $10,000 on new car loans assembled in the U.S. |
Similar provision |
The House version offers a more generous short-term CTC increase, while the Senate version proposes a smaller but permanent and indexed amount with a new refundability formula based on earnings. The Senate also provides a more generous senior deduction.
|
Provision |
House Version |
Senate Version |
|
Child Tax Credit |
$2,500 through 2028 |
$2,200 (2025 onward) indexed after 2025 |
|
Senior Deduction |
$4,000 (2025–2028) income phaseout - $75k (single) / $150k (married filing jointly) |
$6,000 (2025–2028) income phaseout -$75,000 (single) / $150,000 (married filing jointly) |
Qualified Business Income (QBI) Deduction, Research & Development (R&D) Expensing, and Interest Deductions
The Senate Finance Committee's version favors permanence and simplicity. It retains the 20% QBI deduction and makes bonus depreciation and domestic R&D expensing permanent. It also permanently modifies the interest expense limitations to 30% before Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).
|
Provision |
House Version |
Senate Version |
|
QBI Deduction |
23% rate, permanent |
20% rate, permanent |
|
Section 179 |
Section 179 deduction up to $2,500,000 with the deduction reduced dollar for dollar once equipment purchases exceed $4,000,000 i.e. purchase $5,000,000 of equipment in a year the deduction is limited to $1,500,000 |
Similar provision |
|
Bonus Depreciation |
Allows 100% bonus depreciation for property acquired and placed in service between January 19, 2025 and December 31, 2029 |
Permanently allows 100% bonus depreciation for property acquired after January 19, 2025 |
|
R&D Expensing |
5-year extension |
Permanent for domestic only; amortization continues for foreign. Provides retroactive relief for R&D capitalized after December 31, 2021 |
|
Interest Deduction (163(j)) |
Returns to 30% of EBITDA through 2029 |
Returns to 30% of EBITDA permanently |
|
Excess Business Loss Limitation (461) |
Excess business losses are carried forward as excess business losses instead of converting to a net operating loss. This turns what was previously a one-year temporary deferral into a permanent annual limitation. |
Similar provision |
|
Small Business Accounting Methods |
Allows manufacturers a higher threshold -$80 million (currently $31 million) to determine accounting methods and application of interest limitations |
No provision |
|
State income tax nexus |
Expands Public Law 86-272 protection for the sale of tangible personal property: "The term ‘solicitation of orders’ means any business activity that facilitates the solicitation of orders, even if that activity may also serve some independently valuable business function apart from solicitation." |
No provision |
The House proposal eliminates PTET benefits for specified service trades (i.e. Doctors, Lawyers, etc.), while the Senate retains them but adds a cap to mitigate potential abuse.
|
Provision |
House Version |
Senate Version |
|
PTET for Specified Service Trade or Business |
Eliminated |
Retained with cap (greater of $40,000 or 50% of the owner’s allocable share of the entity’s PTET) |
The SALT deduction cap is a major point of contention. The House seeks to expand it, while the Senate holds the current cap steady.
|
Provision |
House Version |
Senate Version |
|
SALT Cap |
Increased to $40,000 per household for incomes under $500,000 |
$10,000 cap made permanent with anti-abuse enforcement |
|
Mortgage Interest |
$750,000 limitation on home mortgage acquisition indebtedness and interest on home equity indebtedness are not deductible (unless loan proceeds are used to substantially improve the home) is made permanent |
Similar to House version except mortgage insurance premiums on acquisition indebtedness are qualified residence interest |
|
Charitable Contributions - nonitemizers |
2025 to 2028 above the line deduction of $150 for individuals / $300 for married couples |
Permanent above the line deduction of $1,000 for individuals and $2,000 for married couples |
|
Floor on Charitable Contributions - itemizers |
No provision |
For taxable years after 2025 individual’s charitable contributions are reduced by 0.5% of taxpayer’s contribution base (generally Adjusted Gross Income) |
|
Miscellaneous Itemized Deductions |
Permanently extends the suspension of miscellaneous itemized deductions |
Similar provision but removes unreimbursed employee expenses for eligible educators from the list of miscellaneous itemized deductions |
|
Overall Itemized Deduction Limitation |
Tax years after 2025 - Itemized deductions are capped for those in the top bracket |
Similar Provisions |
|
Wagering Losses |
Clarification to include deductible expenses incurred in gambling activity |
Similar provisions but deduction limited to 90% of losses but only to the extent of gains from wagering transactions |
The Senate and House versions make substantial changes / reductions to the Inflation Reduction Act’s (IRA) green energy tax provisions.
|
Provision |
House Version |
Senate Version |
|
Energy efficient commercial buildings deduction (179D) i.e. deduction for installing energy efficient systems in commercial and certain tax exempt entities |
No provision |
No deduction for property that begins construction more than 12 months after date of enactment |
|
Energy efficient home credit (25C) i.e. windows, doors, heat pumps, etc. |
No credit for property placed in service after December 31, 2025 |
No credit for property placed in service 180 days after date of enactment |
|
Residential Clean Energy Credit (25D) i.e. solar, geothermal, etc. |
No credit for property placed in service after December 31, 2025 |
No credit for property placed in service 180 days after date of enactment |
|
Previously Owned Clean Vehicle Credit (25E) i.e. electric vehicle |
No credit for vehicles acquired after December 31, 2025 |
No credit for vehicles acquired 90 days after the date of enactment |
|
Clean Vehicle Credit (30D) i.e. electric vehicle |
No credit for vehicles placed in service after 2025. Allows credit to continue through 2026, for manufacturers that sold 200,000 or fewer plug-in electric / clean vehicles after 2009 and before 2026 |
No credit for vehicles acquired 180 days after date of enactment |
|
New Energy Efficient Home Credit (45L) i.e. credit for builders/developers who construct or substantially renovate energy efficient residential homes |
No credit for homes acquired after December 31, 2025, extended to December 31, 2026, if construction began before May 12, 2025 |
No credit for homes acquired 12 months after date of enactment |
|
Credit for Qualified Commercial Clean Vehicles (45W) i.e. business electric vehicle |
Generally, no credit for vehicles acquired after 2025 |
Generally, no credit for vehicles acquired 180 days after date of enactment |
Both versions increase the estate tax exemption, but the Senate includes additional limits and permanent indexing for AMT thresholds. The Senate also proposes reforms to the new individual tax relief measures.
|
Provision |
House Version |
Senate Version |
|
Estate Tax Exemption |
$15M, permanent |
Same |
|
Alternative Minimum Tax (AMT) Exemptions |
Makes higher exemption and phase-out thresholds permanent |
Similar provisions |
|
Individual Income Tax Deduction for Tips |
Tax years 2025 to 2028 full deduction of tip income except for highly compensated employees ($160,000 for 2025) |
Tax years 2025 to 2028 deduction capped at $25,000 phased out starting at $150,000 (single) / $300,000 (joint) adjusted gross income |
|
Tax years 2025 to 2028 FICA tip credit to include payroll taxes paid on tips received in connection with certain beauty services i.e. Hair Salons, etc. |
No provision |
|
|
Individual Income Tax Deduction for Overtime |
Tax years 2025 to 2028 full deduction of qualified overtime pay except for highly compensated employees ($160,000 for 2025) |
Tax years 2025 to 2028 deduction capped at $12,500 phased out starting at $100,000 (single) / $200,000 (joint) adjusted gross income |
|
Tax Credit for Contributions to Scholarship Granting Organizations |
Tax years 2025 to 2029 nonrefundable tax credit limited to the greater of 10% of the taxpayer’s adjusted gross income or $5,000 |
Similar provision |
Taxpayers will generally pay lower taxes in both versions, but the Senate's additional inflation indexing, child tax credit refundability structure, and senior deduction may offer targeted relief.
Business owners may favor the Senate’s permanence in depreciation, Research & Development, and EBITDA-based interest deductions, even with a lower QBI rate.
States and municipalities will need to prepare for diverging impacts due to the Senate’s fixed SALT cap and enforcement mandates.
As the Senate and House work toward reconciliation, it is clear that both chambers prioritize long-term tax stability but differ on scope and generosity. The Senate version leans toward permanence and enforcement, while the House focuses more on short-term relief. Businesses, individuals, and advisors should monitor negotiations and begin scenario planning for phased implementation.