PART I: One, Big, Beautiful Bill

 

Editorial Note

This is the first in a series of articles on the proposed U.S. spending bill. The spending bill is 1,038 pages long and amends various laws to amend, add or rescind certain spending initiatives for the U.S. federal government. Referred to as the One, Big, Beautiful Bill, this bill is very difficult to follow but it's your tax dollars so you should know what is being spent.  The bill is not law and subject to change.

 

Executive Summary

This portion of the bill titled “The One, Big, Beautiful Bill” extends and enhances provisions from the Tax Cuts and Jobs Act of 2017. These changes affect individual tax rates, deductions, credits, and exclusions that were previously set to expire after 2025. The goal is to maintain reduced tax burdens for individuals, families, and businesses beyond the original expiration date. The document references the Internal Revenue Code of 1986 throughout.

 

Key Provisions

Reference to Internal Revenue Code (Sec. 110000)

• All amendments refer to the Internal Revenue Code of 1986, unless explicitly stated otherwise (Sec. 110000(a)).
• Section 15 of the Code, which handles proration of tax rate changes, will not apply to changes in this bill (Sec. 110000(b)).
• Meaning: The bill will directly amend current tax law without transitional rules that normally apply when tax rates shift mid-year.

 

Income Tax Rates (Sec. 110001)

• Makes the individual tax rates from the 2017 Tax Cuts and Jobs Act permanent by removing their expiration in 2025 (IRC §1(j)) (Sec. 110001(a)).
• Adds language for post-2025 inflation adjustments only for the 35% and 37% tax brackets (IRC §1(j)(3)(B)(i)) (Sec. 110001(b)).
• Meaning: Without this change, the top rates would revert to pre-2017 levels (39.6%). Now, the 35% and 37% brackets will continue and be adjusted annually for inflation based on consumer price index calculations. For example, in 2023, the 37% bracket applied to income over $578,125 (single), and it will increase yearly.

 

Standard Deduction (Sec. 110002)

• Makes the increased standard deduction permanent (IRC §63(c)(7)) (Sec. 110002(a)).
• Adds a temporary bonus increase: $1,500 for joint filers, $1,000 for others, from 2025–2028 (Sec. 110002(b)).
• Removes special recalculation language for inflation (Sec. 110002(c)).
• Meaning: The standard deduction nearly doubled under the 2017 law. For 2025, the standard deduction for a married couple filing jointly will be at least $27,700 plus $1,500—totaling $29,200—and adjusted for inflation.

 

Personal Exemptions (Sec. 110003)

• Permanently ends personal exemptions by deleting the sunset provision in IRC §151(d)(5) (Sec. 110003(a)).
• Meaning: Taxpayers will not be able to claim personal exemptions (previously around $4,050 per person) even after 2025. These exemptions were zeroed out under the 2017 law, and this bill makes that permanent.

 

Child Tax Credit (Sec. 110004)

• Makes expanded child tax credit permanent (IRC §24(h)) (Sec. 110004(a)).
• Temporarily raises credit from $2,000 to $2,500 for 2025–2028; returns to $2,000 in 2029 (Sec. 110004(b)).
• Requires valid Social Security Numbers for taxpayers, spouses, and children (Sec. 110004(c)).
• Adds inflation adjustments to the refundable portion and full credit starting in 2025 and 2029, respectively (IRC §24(i)) (Sec. 110004(d)).
• Meaning: More families can continue receiving a larger credit per child, and over time, the credit amounts will increase with inflation. In addition, stricter ID requirements will aim to prevent improper claims.

 

Qualified Business Income Deduction (Sec. 110005)

• Makes the deduction permanent (IRC §199A(i)) (Sec. 110005(a)).
• Increases deduction from 20% to 23% of qualified income (Sec. 110005(b)).
• Eases phase-out thresholds and expands coverage to include certain dividends from Business Development Companies (Sec. 110005(c)-(d)).
• Updates inflation index base year to 2025 (Sec. 110005(e)).
• Meaning: Small business owners, sole proprietors, and certain investors will receive a larger tax break, and more people will qualify due to higher phase-out thresholds. Previously, the deduction phased out starting around $170,000 (single).

 

Estate and Gift Tax Exemption (Sec. 110006)

• Raises the exemption permanently from $5 million to $15 million (IRC §2010(c)(3)) (Sec. 110006(a)).
• Meaning: Estates valued up to $15 million can pass to heirs tax-free. This triples the pre-2017 threshold and ensures large estates continue to benefit from higher exemptions beyond 2025.

 

Alternative Minimum Tax (AMT) (Sec. 110007)

• Makes higher exemption amounts and phase-out thresholds permanent (IRC §55(d)(4)) (Sec. 110007(a)-(b)).
• Meaning: The AMT, which once captured many middle-income earners, will continue to impact fewer people because the exemption threshold (e.g., $81,300 for single filers in 2023) is preserved and adjusted for inflation.

 

Qualified Residence Interest Deduction (Sec. 110008)

• Removes expiration for limitation to $750,000 of mortgage debt (IRC §163(h)(3)(F)) (Sec. 110008(a)).
• Meaning: Homeowners can continue deducting interest only on the first $750,000 of home acquisition debt. Without this, it would have reverted to $1 million.

 

Casualty Loss Deduction (Sec. 110009)

• Restricts casualty loss deductions to federally declared disasters permanently (IRC §165(h)(5)) (Sec. 110009(a)).
• Meaning: Taxpayers can no longer claim deductions for property losses unless the damage occurs in a declared disaster zone.

 

Miscellaneous Itemized Deductions (Sec. 110010)

• Makes permanent the suspension of deductions like tax prep fees, unreimbursed employee expenses, and investment expenses (IRC §67(g)) (Sec. 110010(a)).
• Meaning: These deductions will not return after 2025, increasing taxable income for some itemizers.

 

Itemized Deduction Limit for High-Income Taxpayers (Sec. 110011)

• Reinstates a cap that reduces itemized deductions based on income and taxes paid (IRC §68) (Sec. 110011(a)).
• Meaning: High earners will see reduced benefits from itemized deductions. For example, if taxable income exceeds the threshold for the 37% bracket, the reduction formula will apply.

 

Bicycle Commuting Reimbursement (Sec. 110012)

• Permanently ends tax exclusion for employer reimbursements for biking to work (IRC §132(f)(8)) (Sec. 110012(a)).
• Meaning: Employees must now treat such reimbursements as taxable income.

 

Moving Expense Deduction (Sec. 110013)

• Makes permanent the limitation of moving expense deductions to military members (IRC §§217(k), 132(g)(2)) (Sec. 110013).
• Meaning: Most employees can no longer deduct moving costs or exclude reimbursements from income.

 

Wagering Losses (Sec. 110014)

• Makes permanent the rule that wagering losses are only deductible up to the amount of winnings (IRC §165(d)) (Sec. 110014(a)).
• Meaning: Gamblers cannot claim net losses beyond what they won, continuing a key limit.

 

ABLE Account Contributions (Sec. 110015)

• Makes permanent the higher contribution limits and adds a refined inflation calculation (IRC §529A(b)(2)(B)) (Sec. 110015(a)).
• Meaning: People with disabilities can continue to receive higher savings contributions in ABLE accounts, which are tax-advantaged.

 

Saver’s Credit for ABLE Contributions (Sec. 110016)

• Includes ABLE account contributions in the definition of eligible amounts for the saver’s credit (IRC §25B(d)(1)) (Sec. 110016(a)).
• Meaning: Low-income earners contributing to ABLE accounts may qualify for a tax credit, encouraging more savings for disability-related expenses.

 

529 Plan Rollovers to ABLE Accounts (Sec. 110017)

• Allows continued rollover of 529 tuition savings plan funds into ABLE accounts (IRC §529(c)(3)(C)(i)(III)) (Sec. 110017(a)).
• Meaning: Families can transfer education savings to disability savings accounts without tax penalties beyond 2025.

 

Hazardous Duty Tax Exclusion (Sec. 110018)

• Makes permanent the income exclusion for service in the Sinai Peninsula and adds Kenya, Mali, Burkina Faso, and Chad (Public Law 115–97 §11026) (Sec. 110018).
• Meaning: U.S. Armed Forces serving in these regions won’t be taxed on pay received during qualifying periods.

 

Student Loan Discharge Tax Exemption (Sec. 110019)

• Makes permanent the tax-free status of student loan discharges due to death or total and permanent disability (IRC §108(f)(5)) (Sec. 110019).
• Meaning: Discharged student loan amounts won’t count as taxable income for affected individuals and families. Proper Social Security Numbers must be provided to qualify.

 

Source: https://www.congress.gov/bill/119th-congress/house-bill/1/text