This Bill Includes Tax Provision Changes
On May 22, 2025, the House of Representatives passed H.R.1 (the One Big Beautiful Bill Act) by a vote of 215-214. The bill had been debated for more than 20 hours by the House Rules Committee prior to it being approved and moved to be considered by the full House of Representatives.
Prior to approval by the House Rules Committee, some of the tax provisions that passed out of the House Ways and Means Committee were amended. Below are the changes that were made. See our previous article for key items contained in the House Ways and Means tax package.
SALT Deduction Cap
The deduction for state and local taxes (SALT cap) is increased to $40,000 ($20,000 for married taxpayers filing separately). If a taxpayer’s modified adjusted gross income (MAGI) is more than $500,000 ($250,000 for married taxpayers filing separately), the cap would phase down by 30% of the excess MAGI over the threshold until it reaches $10,000 ($5,000 for married taxpayers filing separately). In 2026-2033, the $40,000 and $500,000 amounts would be increased by 1% per year. In the years 2034 and after, the cap would remain at the 2033 level.
Prior proposed legislation included a $30,000 ($15,000 for married taxpayers filing separately) cap with the MAGI phase-out starting at $400,000 (for married taxpayers filing separately) and a 20% phase down until reaching $10,000 ($5,000 for married taxpayers filing separately).
The bill doesn’t allow pass-through entities that are considered specified service trades or businesses (SSTBs) to deduct state and local income taxes. Those taxes would be passed through to their owners separately and subject to the deduction cap. This was included in the original House Ways and Means proposed bill and wasn’t changed in the final bill that passed the House.
Itemized Deduction Limitation
The proposed bill that passed out of the House Ways and Means Committee included a provision that permanently removed the overall limitation on itemized deductions and would have implemented a limitation for those taxpayers in the 37% tax bracket. In most cases, this limitation would have effectively limited the tax savings from those itemized deductions to 35% of the total itemized deductions.
The final bill that passed the House includes the permanent removal of the overall limitation for those taxpayers not in the 37% tax bracket. However, it adds another limitation for those taxpayers in the 37% tax bracket. The change would further limit those taxpayers’ itemized deductions based on the amount of SALT they deducted in addition to the 35% limitation mentioned above.
Clean Electricity Production Credit and Clean Investment Tax Credit
For both of these credits, the proposed bill out of the House Ways and Means Committee included a phase-out over the next seven years starting in 2029, with credit transferability repealed.
The final bill that passed the House accelerates the phase-out. Construction of an eligible facility must now start within 60 days of enactment, and the plant must be placed in service by the end of 2028. Credits would be repealed for wind and solar leasing arrangements. Transferability would remain repealed.
The bill now heads to the Senate where a July 4, 2025, deadline is still the goal to have the legislation passed.
We’ll continue to monitor this and other legislation, updating our clients on relevant changes that may impact them. In the meantime, if you have questions about how political and current events may impact you or your business, please schedule a call.
