The Senate Finance Committee released its draft of proposed tax provisions as part of the ongoing budget reconciliation process. While largely aligned with the House’s “One Big Beautiful Bill Act” (H.R. 1), the Senate version includes key differences across individual, business, and international tax provisions.

Individual Tax Provisions

• Tax Rates & Deductions: TCJA individual tax rates and standard deduction amounts made permanent. Adds inflation adjustment for lower brackets.
• SALT Cap: Retains $10,000 cap but includes anti-avoidance rules and separate treatment of passthrough entity taxes (PTETs); final SALT cap still under negotiation.
• Senior Deduction: Adds $6,000 temporary deduction (2025–2028) for taxpayers age 65+ with income phaseouts.
• Child Tax Credit: Increases nonrefundable credit to $2,200; makes $1,400 refundable portion permanent.
• QBI Deduction (Sec. 199A): Made permanent; expands phase-in thresholds but retains 20% deduction rate (House proposed 23%).
• Estate & Gift: Exemptions raised to $15M/$30M (single/joint) in 2026, indexed for inflation.
• AMT & Itemized Deductions: AMT exemption amounts extended; replaces Pease limitation with a cap on deduction benefit (35¢ per dollar for top earners).
• Other Notable Deductions:
  • No tax on qualified tips (up to $25K) and overtime (up to $12.5K/$25K) for 2025–2028.
  • Permanent changes to mortgage interest, wagering losses, casualty losses, and charitable contributions for both itemizers and non-itemizers.

Business Tax Provisions

• Bonus Depreciation: Permanent 100% first-year bonus depreciation for assets placed in service after Jan. 19, 2025.
• Sec. 179: Expensing cap increased to $2.5M (phase-out begins at $4M).
• R&D Expenses: Allows immediate expensing of U.S.-based R&D starting in 2025; retroactive relief available for prior years for small businesses.
• Interest Deduction (Sec. 163(j)): EBITDA-based limitation reinstated; adjusted taxable income excludes Subpart F, GILTI, and Sec. 78 amounts.
• Employer-Provided Child Care: Credit increased to $500K; higher rates for qualifying small businesses.
• Opportunity Zones: Program made permanent with narrowed eligibility criteria starting in 2027.

International Tax Provisions

• GILTI & FDII: Deduction percentages lowered, effective tax rate increased to 14%; FDII and GILTI renamed and restructured.
• Foreign Tax Credit: Limitations adjusted to restrict foreign deductions allocable to GILTI.

Superfund Excise Tax Repeal

While not included in either the House-passed bill (H.R. 1) nor the Senate Finance Committee’s proposal, Senator Ted Cruz (R-TX) is separately leading an effort to repeal the Superfund (chemical) excise tax imposed under the 2021 Infrastructure Investment and Jobs Act.

Cruz reintroduced the Chemical Tax Repeal Act, with strong support from industry groups such as the U.S. Chamber of Commerce, American Chemistry Council, and others. The repeal effort aims to either be included in the final reconciliation package or advance as standalone legislation.