House: Reinstates 100% bonus depreciation for assets placed in service on or after Jan. 20, 2025, and before Jan. 1, 2030. Phasedowns of 20% per year begin for tax years beginning on or after Jan. 1, 2030.

Senate proposal: Permanently reinstates 100% bonus depreciation for property placed in service on or after Jan. 19, 2025.

Takeaway: With 100% bonus depreciation possibly being restored, consider significant fixed asset purchases in 2025 from previously delayed fixed asset purchases in 2024.

 

House: A 100% depreciation deduction is available for certain U.S.-based real property facilities used in the production of tangible personal property. To qualify, construction must commence between Jan. 20, 2025, and Dec. 31, 2028, and the facility or improvement must be placed in service by Dec. 31, 2032. Subject to exceptions for certain facility acquisitions, there is an original use requirement. For purposes of the proposed legislation, production means the manufacture, production, or refining of a product that results in a substantial transformation of that product.

Senate proposal: Allows for 100% bonus depreciation on the adjusted basis of qualified production property. Qualified production property is non-residential real property which is 1) used by the taxpayer as an integral part of a qualified production activity, 2) is located in the U.S., 3) original use begins with the taxpayer, and 4) the construction of the property begins after Jan. 19, 2025 and before Jan. 1, 2031.

 

House: Increases the expensing limit to $2.5 million, with a phase-out threshold of $4 million, both indexed for inflation starting in 2026.

Senate proposal: Proposes to increase the maximum amount of Section 179 expense to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million. The amounts will be adjusted for inflation annually, and this proposal applies to property placed in service tax years beginning after Dec. 31, 2024.

Takeaway: Consider these potential new thresholds – along with the potential changes to bonus depreciation – when analyzing fixed asset purchases and placed-in-service dates for projects. Individual tax return factors should also be considered when evaluating Section 179 considerations. 

House: Adjusted taxable income (ATI) will once again include addbacks for depreciation and amortization beginning with tax years beginning on or after Jan. 1, 2025, and before Jan. 1, 2030.

Senate proposal: Restores the computation of ATI to exclude depreciation, amortization, and depletion for taxable years beginning after Dec. 31, 2024.

Takeaway: With the possibility of the calculation of ATI going back to pre-2022 rules, make sure that any interest limitation calculation is updated for 2nd, 3rd or 4th quarterly estimates or 2025 year-end projections (assuming a calendar year-end taxpayer). Review debt agreements and consider refinancing. 

House: Not applicable

Senate proposal: The Senate proposal provides a new ordering rule. It requires that the Section 163j limitation is calculated prior to the application of any interest capitalization provision, defined as interest which is 1) required to be charged to capital account or 2) may be deducted or charged to capital account.

 

House: For tax years beginning on or after Jan. 1, 2025, and before Jan. 1, 2030, domestic research and experimentation expenditures may be deducted in the year paid or incurred. Taxpayers have an election to capitalize such expenditures over 60 months. Foreign expenditures must still be amortized and capitalized over 15 years.

For tax years beginning after Dec. 31, 2024, and before Jan. 1, 2030, taxpayers must reduce their domestic research and development (R&D) expenses by the amount of the research credit claimed under Internal Revenue Code (IRC) Section 41. Alternatively, taxpayers may elect to claim a reduced Section 41 research credit in lieu of adjusting their R&D expenses. 

Read more.

Senate proposal: Restoration of immediate deductibility for domestic R&D costs beginning after Dec. 31, 2024. Additionally, small business taxpayers (average annual gross receipts <$31 million) will be permitted to apply this retroactively to 2022 tax years via an election. At this time, there are no additional details on the manner in which the election is made by a taxpayer. This proposal also provides rules on the coordination of deducting domestic R&D expenses with the research credit. 

Takeaway: Consider the footprint of the business’s R&D work. With the ability to deduct domestic Section 174 costs possibly available for 2025, consider conducting research domestically rather than abroad, if possible.

 

House: Expands eligibility for simplified accounting methods by raising the gross receipts threshold for small business taxpayers.

Senate proposal: The Senate version of the proposal does not include any revisions to the current law as it applies to the small business taxpayer exception.

House: Effective for tax years beginning after Dec. 31, 2025, corporate charitable deductions will be limited by establishing a floor of 1% and does not exceed 10% of the corporation’s taxable income. Contributions that exceed this threshold may be subject to disallowance, although certain carryforward provisions will apply to those disallowed amounts.

Senate proposal: Effective for tax years beginning after Dec. 31, 2025, corporate charitable deductions will be limited when total contributions exceed 1% but do not exceed 10% of the corporation’s taxable income. Contributions that exceed this threshold may be subject to disallowance, although certain carryforward provisions will apply to those disallowed amounts.

House: The initial designations of Qualified Opportunity Zones (QOZs) will expire after Dec. 31, 2026. A new round of QOZ designations will be established for investments made from Jan. 1, 2027, through Dec. 31, 2033, under rules that closely mirror those used for the original designations. Other changes proposed in the bill include certain changes as to what qualifies, potential new reporting requirements, and income recognition on investments that meet certain criteria outlined in the bill.

Senate proposal: Establishes a permanent QOZ policy, whereby rolling 10-year QOZ designations with lowered substantial rehabilitation test from 100% to 50% for rural Opportunity Zones will begin on Jan. 1., 2027. Rules that closely mirror those used for the original designations will be utilized; however, additional revisions include new definitions for low-income communities (LICs), updated basis step-up levels based on the holding duration of the investment, and the creation of a new qualified rural opportunity fund (QROF). Additionally, new reporting requirements will be established.

House: The proposed legislation would enact a restriction on certain pass-through entities from taking a PTET deduction. Specifically, the deduction would be eliminated for entities classified as SSTBs (specified service trades or businesses) for Section 199A purposes. This includes doctors, lawyers, accountants, investment managers, and entertainers, among other service providers.

Read more.

Senate proposal: The proposed legislation doesn’t repeal PTETs for SSTBs as with the House bill but provides general limitations on the amount of deduction allowed and updates/modifies the list of “specified taxes.” 

 

House: For calendar years 2026 through 2029, the state housing credit ceiling will be increased by 12.5%, allowing states to allocate additional low-income housing tax credits. Additionally, for projects financed with tax-exempt bonds issued in 2026 through 2029, the 50% test is reduced to 25%. 

Senate proposal: The provision would permanently increase the state housing credit ceiling by 12%. Additionally, the tax-exempt bond financing requirements will be reduced from 50% to 25% for projects financed by bonds starting in 2026.

House: The bill proposes that no Employee Retention Credit claims filed after Jan. 31, 2024, will be paid, and would also extend the statute of limitations period to six years for IRS ERC-related assessments.

Senate proposal: The Senate’s ERC proposal is the same as the House’s version.

 

House: The proposed legislation includes a provision that limits the amortization deduction to 50% of the adjusted basis of intangible assets acquired in connection with the purchase of a sports franchise. The remaining 50% would be non-amortizable and thus permanently nondeductible for tax purposes. This change would apply prospectively to acquisitions occurring after Dec. 31, 2025.

Senate: Not applicable

 

House: The proposed legislation includes a provision that limits the amortization deduction to 50% of the adjusted basis of intangible assets acquired in connection with the purchase of a sports franchise. The remaining 50% would be non-amortizable and thus permanently nondeductible for tax purposes. This change would apply prospectively to acquisitions occurring after Dec. 31, 2025.

Senate: Not applicable

 

House: The proposed legislation would make permanent a 36.5% deduction (down from the prior law of 37.5%) for foreign-derived intangible income (FDII), resulting in a sustained effective tax rate of 13.335% on such income.

Senate proposal: The proposed legislation would make permanent a 33.34% deduction (down from the prior law of 37.5%) for FDII, resulting in a sustained effective tax rate of 14% on such income.

 

House: The proposed legislation would make permanent the following BEAT rates: 10.1% for most corporations (up from a previous 10%) and 11% for banks and registered securities dealers. It would also preserve the existing treatment of tax credits, repealing the post-2025 changes that would have increased the BEAT rate and limited the ability to offset regular tax liability with income tax credits.

Senate proposal: The proposed legislation would make permanent the following BEAT rates: 14% for most corporations (up from a previous 10%). It would also preserve the existing treatment of tax credits, repealing the post-2025 changes that would have increased the BEAT rate and limited the ability to offset regular tax liability with income tax credits.

House: A new IRC Section 899 would raise various tax rates, including withholding rates, on taxpayers of “discriminatory foreign countries” that levy defined “unfair,” “discriminatory,” or “extraterritorial” taxes. These higher rates, up to 20 percentage points above the statutory rate, could lead to a higher BEAT for some taxpayers. Certain exceptions and safe harbors would apply.

Read more.

Senate proposal: Increases various tax rates, including withholding rates, on taxpayers of “discriminatory foreign countries” that levy defined “unfair,” “discriminatory,” or “extraterritorial” taxes. These higher rates, up to 15 percentage points above the statutory rate, could lead to a higher BEAT for some taxpayers. Certain exceptions and safe harbors would apply.

 

House:

Read our full overview of clean energy proposals.(Opens a new window)

Under the proposed legislation, tax provisions related to the following clean energy tax credits would be repealed after Dec. 31, 2025:

- Clean vehicle credit (Section 30D) extended one year (2026) for companies not meeting 200,000 unit cap

- Credit for previously owned clean vehicles (Section 25E)

- Credit for qualified commercial clean vehicles (Section 45W) subject to a limited binding contract exception date of May 12, 2025, if vehicle is placed in service before 2033

- Alternative fuel refueling property credit (30C)

- Energy efficient home credit (25C)

- Residential clean energy credit (25D)

 

The proposed legislation revises the following sections related to clean energy:

- Section 45Y* – Clean Electricity Production Credit: Phases out for any qualified facility that hadn’t begun construction within 60 days of the enactment of the bill or placed in service after the end of 2028. Transferability limited to two years after enactment of legislation.

- Section 48E* – Clean Electricity Investment Credit: Follows the same phase-out schedule as Section 45Y, ending after 2028 or earlier. Transferability limited to two years after enactment.

- Section 45Q – Carbon Sequestration Credit: Unchanged, but subject to Foreign Entity rules, and transferability limited to two years after enactment of legislation. Master Limited Partnership ownership allowed.

- Section 45U – Zero-Emission Nuclear Power Production Credit: The credit will terminate at the end of 2031, no phaseout.

- Section 45V – Clean Hydrogen Production Credit: Terminates for facilities beginning construction after 2025.

- Section 45X – Advanced Manufacturing Production Credit: Phases out after 2031, but in 2029 for wind energy components, with new restrictions on transferability after Dec. 31, 2027, and foreign entity involvement rules apply.

- Section 48 – Energy Investment Credit: Expired under existing law subject to commence construction rules pre-2024, except for geothermal heat pumps subject to a new phase-out in 2031, beginning in 2030. Transferability limits do not apply to Section 48.

- Section 45Z – Clean Fuel Production Credit: Extended through 2031 but limited to fuels produced using North American feedstocks. Foreign Entity rules apply starting in 2026.

- Section 45L – New Energy Efficient Home Credit: Eliminated for homes acquired after Dec. 31, 2025, unless placed in service before May 12, 2026.

- 100% Bonus depreciation – Reinstates 100% bonus depreciation for assets placed in service on or after Jan. 20, 2025, and before Jan. 1, 2030. Phasedowns of 20% per year begin for tax years beginning on or after Jan. 1, 2030.

 

*In order to qualify for the Section 48E and 45Y credits, a project must begin construction within 60 days of the bill’s enactment and the project must be placed in service by Dec. 31, 2028.

 

Senate proposal:

Under the proposed legislation, the following provisions will be repealed 90 days after enactment:

- Credit for previously owned clean vehicles (Section 25E) 

 

Under the proposed legislation, the following provisions will be repealed 180 days after enactment:

- Clean vehicle credit (Section 30D)

- Credit for qualified commercial clean vehicles (Section 45W)

- Energy efficient home credit (25C)

- Residential clean energy credit (25D)

 

Under the proposed legislation, the following provisions will be repealed 12 months after enactment:

- Alternative fuel refueling property credit (30C)

- Energy Efficient Commercial Buildings Deduction (179D)

- New Energy Efficient Home Credit (45L)

 

Other miscellaneous credits

- Zero-Emission Nuclear Power Production Credit (45U) - The credit is maintained with additional reporting requirements beginning for tax years beginning after Dec. 31, 2027.

- Clean Hydrogen Production Credit (45V) - No changes from House version.

- Clean Electricity Production Credit (45Y) - Phase down  for any qualified facility beginning in tax years 2026 as follows: 60% of otherwise available credit for any qualified facility that begins construction during calendar year 2026, 20% of otherwise available credit for any qualified facility beginning construction during 2027, and zero credit thereafter.

- Clean Electricity Investment Credit (48E) - Follows same phase-out as the Clean Electricity Production Credit under Section 45Y.

- Advanced Manufacturing Production Credit (45X) - Phased down in December 2031 and December 2028 for wind and energy components.

- Clean Fuel Production Credit (45Z) - The provision imposes a 20% haircut on the value of the credit for fuel produced from feedstocks produced or grown outside the U.S., effective for transportation fuel produced after Dec. 31, 2025.

- Carbon Sequestration Credit (45Q) –  Same as House bill but without provisions for transferability.

 

 

Senate proposal: This provision would repeal five-year MACRS for purposes of Section 48E (Clean Electricity Investment Tax Credit) or Section 45Y (Clean Electricity Production Tax Credit) assets.

 

House: Allows individuals to claim a federal income tax deduction for qualified tips, excluding tips and compensation paid to highly compensated individuals (defined as 5% owners or those earning over $160,000 annually) received between 2025 and 2028. This deduction is available to non-itemizers.

Senate proposal: Allows individuals to claim a federal income tax deduction for qualified tips received between 2025 and 2028. This deduction is available to non-itemizers.

Takeaway: If this change is implemented, certain taxpayers in industries traditionally compensated with tips could expect a reduced tax liability in 2025 and possibly future tax years. 

House: Allows a federal income tax deduction equal to the amount of qualified overtime compensation received by an employee, excluding tips and compensation paid to highly compensated individuals (defined as 5% owners or those earning over $160,000 annually). The deduction applies to tax years beginning after Dec. 31, 2024, and before Jan. 1, 2029, and is available only to individuals with a valid Social Security number. This deduction is available to non-itemizers.

Senate proposal: Allows a federal income tax deduction equal to the amount of qualified overtime compensation received by an employee. The deduction applies to tax years beginning after Dec. 31, 2024, and before Jan. 1, 2029, and is available only to individuals with a valid Social Security number. This deduction is available to non-itemizers.

Takeaway: If this change is implemented, certain taxpayers could expect a reduced tax liability in 2025 and possibly future tax years.

 

House: Allows individuals to deduct up to $10,000 per year in interest paid on loans for vehicles assembled in the U.S., beginning with purchases made in 2025. The deduction applies to vehicles under 14,000 pounds and is available regardless of whether the taxpayer itemizes deductions. Limitations and phase-outs apply.

Senate proposal: Allows individuals to deduct up to $10,000 per year in interest paid on loans for vehicles assembled in the U.S., beginning with purchases made in 2025. The deduction is available regardless of whether the taxpayer itemizes deductions. Limitations and phase-outs apply.

Takeaway: If this change is implemented, certain qualifying taxpayers could have an increase in their itemized deductions that would reduce overall tax liability in 2025 and possibly future tax years.

 

House: Raises the state and local tax (SALT) deduction cap from $10,000 to $40,000 for individuals with a modified adjusted gross income of $500,000 or less, beginning in 2026 through 2033 with increases to the deduction and AGI threshold annually. (These figures are up from a previously proposed cap of $30,000 for individuals with modified AGI of $400,000 or less.)

Senate proposal: The SALT deduction cap of $10,000 ($5,000 for a married taxpayer filing a separate return) would be permanently extended for taxable years beginning after Dec. 31, 2025. The provision also clarifies and modifies the list of taxes that would be subject to, or excluded from, the SALT cap.

Takeaway: The SALT cap remains a contentious issue in the House, and the specifics of both the cap and phaseout of the deduction remain under discussion. The intent is that no taxpayer should be worse off in terms of the SALT deduction under the proposed bill than they are today. Should the bill pass with this or a similar provision, consider revisiting projected 2025 tax toward the end of the year to assess if there is a benefit to prepaying 2025 Q4 estimates by Dec. 31, 2025. 

 

House: Although the Pease limitation, the current overall limitation, would be eliminated, it would be replaced by a new limitation whereby itemized deductions would be limited to an effective tax rate of 35%.

Senate proposal: Although the Pease limitation, the current overall limitation, would be eliminated, it would be replaced by a new limitation whereby itemized deductions would be limited to an effective tax rate of 35%. However, it does remove unreimbursed employee expenses for eligible educators from the list of miscellaneous itemized deductions. 

Takeaway: While the increase in the SALT deduction would give taxpayers in high tax jurisdictions a benefit, the benefit of a marginal dollar of additional deduction is limited relative to the tax on a marginal dollar of income at the top tax rates.

 

House: Makes the deduction permanent and increases the deduction rate from 20% to 23%, while replacing the phase-in rules with a simplified two-step limitation based on W-2 wages and qualified property.

Senate proposal: Makes the deduction of qualified business income permanent. Expands the deduction limit phase-in range, eases the impact of limitations for pass-through entities subject to the wage and investment limitation, and introduces an inflation-adjusted minimum deduction for certain taxpayers.

Takeaway: Owners of and investors in businesses may see an increase in their QBI deduction. Owners of and investors in certain specified service trades or businesses (SSTBs) may see an increased deduction under the proposed bill as the deduction for SSTBs is not phased out as quickly.

 

House: Makes the Section 461(l) permanent and any excess business losses disallowed in tax years beginning after Dec. 31, 2024, would be taken into account in determining the taxpayer’s excess business loss in subsequent years.

Senate proposal: The Senate’s excess business losses proposal is the same as the House’s version.

Takeaway: Individuals with substantial business losses may be more limited in how they can take those losses against future income under the proposed language. Such individuals may need to defer losses until they have business income in future years.

Read more.

 

House: Not applicable.

Senate proposal: Modifies the QSBS gain exclusion by providing a tiered gain exclusion for QSBS acquired after the date of enactment. In particular, the provision allows a 50% exclusion after three years, 75% after four years and 100% after five years. Also, the proposal increases the per-issuer dollar cap to $15 million for post-enactment shares, indexed to inflation beginning in 2027. For stock issued after the applicable date, the corporate-level aggregate-asset ceiling is increased to $75 million, indexed to inflation beginning in 2027. The provision is generally effective for stock issued or acquired, and to taxable years commencing, on or after the date of enactment.

 

House: The lifetime unified gift/estate tax exemption under the proposed bill would be increased to $15 million per person, linked to inflation for future increases. Under current law, this amount is roughly $14 million per person in 2025, but would decrease by roughly half after Dec. 31, 2025.

Senate proposal: The lifetime unified gift/estate tax exemption under the proposed bill would be increased to $15 million, linked to inflation for future increases.

Takeaway: This largely represents a continuation of the status quo relative to the lifetime exemption today. Individuals with estates at or above the lifetime exemption may be able to make additional gifts or contribute additional amounts to trusts. Individuals should consider reviewing their estate plan to make sure it meets their needs and goals.

 

House: The bill proposes a new type of tax-advantaged savings account called a “Trump” account. The government would put $1,000 into an account for children born between 2025 and 2028. Parents could put up to $5,000 in cash into the account per year, which could be invested subject to certain restrictions. Up to half of the funds could be accessed early between ages 18 and 25 to pay for higher education or the purchase of a first home. Full distribution of the funds would be mandatory at age 31.

Senate proposal: The bill proposes a new type of tax-advantaged savings account called a “Trump” account. The government would put $1,000 into an account for children born between 2025 and 2028. Parents could put up to $5,000 in cash into the account per year, which could be invested subject to certain restrictions. Up to half of the funds could be accessed early between ages 18 and 25 to pay for higher education or the purchase of a first home. Full distribution of the funds would be mandatory at age 30.

Takeaway: This would provide another vehicle for wealthy families to save for their children’s futures in a tax-advantaged way. The tax benefits are not as strong as in a 529 plan, but the funds can be used for a wider range of activities.