On the morning of May 22, 2025, the U.S. House of Representatives narrowly passed the “One Big Beautiful Bill Act,” a sweeping legislative package that rewrites significant portions of the U.S. tax code. Championed by Trump and House GOP leadership, the bill promises bold economic stimulus, tax relief, and controversial social policy shifts. However, despite its success in the House, its future in the Senate remains uncertain.

This article summarizes the core tax law changes and explores how the legislation could change as it moves through the Senate.

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Key Tax Law Changes in Bill

1. Permanent Extension of 2017 Tax Cuts

The bill locks in the tax rate cuts enacted under the 2017 Tax Cuts and Jobs Act (TCJA). These include reductions across several income brackets and a doubling of the standard deduction. While many of the TCJA’s individual provisions were set to expire after 2025, the new bill eliminates that sunset.

What it means: The move ensures continued lower tax rates for individuals and families, particularly middle- and upper-income earners. Critics argue that it disproportionately benefits higher-income taxpayers and worsens the federal deficit.

2. Temporary Boost to the Standard Deduction and Child Tax Credit

From 2025 through 2028, the standard deduction increases by:

• $1,000 for single filers
• $2,000 for joint filers

Additionally, the Child Tax Credit increases from $2,000 to $2,500 during the same timeframe, after which it reverts but is indexed for inflation.

What it means: This change offers modest relief for families, especially in the short term, but its expiration date raises concerns about future tax hikes unless further extended.

3. Expanded SALT Deduction

A politically charged provision raises the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for households earning up to $500,000, with a gradual phase-down for higher-income earners.

What it means: This is a win for taxpayers in high-tax states like New York, California, and New Jersey. However, many fiscal conservatives oppose this as a “blue-state bailout.”

4. Exemptions for Tips, Overtime, and Car Loan Interest

This provision exempts from federal income tax:

• Tips (mostly affecting hospitality workers)
• Overtime pay
• Car loan interest

These exemptions apply through 2028 and are projected to save certain taxpayers up to $1,750 per year.

What it means: While beneficial to workers in sectors with irregular income, the provision is expensive and could create reporting and enforcement complexities for the IRS.

5. Increased Estate Tax Exemption

The estate tax exemption rises to $15 million per individual (up from approximately $13.6 million), adjusted annually for inflation.

What it means: A direct benefit to high-net-worth individuals and families, this change could further concentrate wealth over generations.

6. Enhanced Small Business Deduction

The deduction for qualified business income rises from 20% to 23%, impacting pass-through entities like LLCs, partnerships, and S-corporations.

What it means: Popular among small business owners, this move aims to stimulate entrepreneurship but adds to the complexity of business tax compliance.

7. MAGA Savings Accounts

A newly introduced program, MAGA (“Money Accounts for Growth and Advancement”) Savings Accounts, allocates $1,000 to each child born between 2024 and 2028. The money is tax-free and grows in a Treasury-managed account.

What it means: Billed as a pro-family savings initiative, critics argue it is too limited in scope and lacks provisions for parental contributions or usage flexibility.

8. Tax on Remittances

A 3.5% federal tax on money transfers sent abroad is introduced to curb capital outflows and fund domestic programs.

What it means: While this may generate billions in revenue, it’s likely to impact immigrant communities the most and may face legal or international trade challenges.

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Additional Provisions in Bill

Social Program Reforms

The bill imposes stricter work requirements for Medicaid and SNAP (food stamps), likely reducing the number of eligible beneficiaries.

Energy and Education Policy Changes

Clean energy tax credits from the Inflation Reduction Act are rolled back, and taxes are levied on large university endowments. Nonprofits suspected of supporting terrorism risk losing tax-exempt status.

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What Happens in the Senate?

While the bill passed the House largely along party lines, the Senate presents a different landscape—one where Republicans hold a slim majority and where moderate and swing-state Senators will play a decisive role. Here’s what could change:

1. Trimming the SALT Deduction Increase

Several Senate Republicans, especially from lower-tax states, are expected to push back against the expanded SALT deduction. Critics argue it favors wealthy taxpayers in Democratic-leaning states and contradicts conservative fiscal principles.

Expected Outcome: A reduction of the cap from $40,000 to something closer to $20,000 or a steeper phase-out for higher incomes may be introduced.

2. Rethinking the Remittance Tax

The Senate is likely to face intense lobbying from business groups, immigrant advocacy organizations, and international partners over the 3.5% remittance tax. Critics call it regressive and potentially harmful to diplomatic relations.

Expected Outcome: The Senate may remove or reduce this provision, or exempt specific countries from the tax.

3. Deficit and Sunset Provisions

Many Senators, including some Republicans, are concerned about the bill’s projected $3.8 trillion addition to the deficit. There may be demands for:

• More temporary provisions
• Revenue offsets such as closing corporate loopholes
• Caps on discretionary spending

Expected Outcome: Expect more provisions to include sunset clauses, with promises to revisit or extend them based on fiscal outcomes.

4. Energy Policy Adjustments

Some swing-state Senators with significant clean energy industries (like Arizona and Michigan) may oppose the full repeal of climate incentives.

Expected Outcome: Partial restoration of clean energy credits or preservation of incentives tied to domestic manufacturing.

5. Modifications to MAGA Savings Accounts

While largely symbolic, the MAGA accounts could be revised for broader eligibility or better integration with existing education and child savings programs.

Expected Outcome: Possible expansion or integration with existing 529 plans or child development accounts.

6. Restoring Medicaid and SNAP Provisions

The work requirements face opposition from Senate Democrats and some moderate Republicans concerned about disenfranchising low-income populations.

Expected Outcome: These provisions may be softened or exchanged for less punitive eligibility reforms.

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Political Outlook of Bill

The bill reflects a bold return to Trump-era economic themes—tax cuts, deregulation, and reduced social spending—while adding populist elements like tip exemptions and family savings plans. However, the Senate is likely to insist on compromises before passage.

The most contentious elements—such as the SALT deduction, remittance tax, and social welfare cuts—are expected to be trimmed or rewritten entirely. Behind closed doors, lawmakers are negotiating which provisions can be preserved while ensuring the bill can pass under reconciliation rules or withstand a potential filibuster.

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The Bill

The “One Big Beautiful Bill” marks the most significant tax reform effort since 2017, but its future is far from certain. As the legislation enters the Senate, expect further changes—some substantial—before it can become law. While House Republicans see it as a political win ahead of the 2026 midterms, the ultimate shape of the bill will hinge on Senate negotiations, bipartisan support, and fiscal realities.

Whether or not the bill lives up to its name remains to be seen.

Contact Factoring Specialist, Chris Lehnes

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Executive Summary of Bill

On May 22, 2025, the U.S. House of Representatives narrowly passed the “One Big Beautiful Bill Act,” a comprehensive legislative package significantly altering the U.S. tax code, along with social program and energy policy changes. Championed by Trump and House GOP leadership, the bill focuses on permanent tax cuts, temporary tax relief measures, new savings initiatives, and controversial social policy reforms. Despite House passage, the bill faces significant challenges and potential modifications as it moves to the Senate, where a slim Republican majority and moderate Senators are expected to influence key provisions, particularly regarding deficit concerns, the SALT deduction, and the remittance tax.

Main Themes and Key Ideas/Facts:

The “One Big Beautiful Bill Act,” as passed by the House, centers around several core themes:

• Permanent Tax Relief: A primary goal is to make the 2017 Tax Cuts and Jobs Act (TCJA) permanent.
• Key Fact: The bill permanently extends the individual tax rate cuts enacted under the 2017 TCJA, which were set to expire after 2025. This includes reductions across income brackets and a doubled standard deduction.
• Quote: “The bill locks in the tax rate cuts enacted under the 2017 Tax Cuts and Jobs Act (TCJA)… While many of the TCJA’s individual provisions were set to expire after 2025, the new bill eliminates that sunset.”
• Implication: Ensures continued lower tax rates, with critics arguing it disproportionately benefits higher earners and increases the federal deficit.
• Targeted (Temporary) Tax Relief and Exemptions: The bill includes specific provisions designed to provide more immediate, though often temporary, relief to certain groups.
• Key Fact: Includes a temporary increase in the standard deduction ($1,000 for single filers, $2,000 for joint) and the Child Tax Credit (from $2,000 to $2,500) from 2025 through 2028.
• Key Fact: Exempts tips, overtime pay, and car loan interest from federal income tax through 2028, with a projected annual saving of up to $1,750 for certain taxpayers.
• Quote: “From 2025 through 2028, the standard deduction increases by: $1,000 for single filers, $2,000 for joint filers.” and “These exemptions apply through 2028 and are projected to save certain taxpayers up to $1,750 per year.”
• Implication: Offers short-term relief but raises concerns about future tax increases upon expiration and complexities for the IRS.
• Expansion of Tax Benefits for Higher Earners and Businesses: The bill includes provisions that primarily benefit wealthy individuals and businesses.
• Key Fact: The State and Local Tax (SALT) deduction cap is raised from $10,000 to $40,000 for households earning up to $500,000.
• Key Fact: The estate tax exemption is increased to $15 million per individual (adjusted annually for inflation).
• Key Fact: The deduction for qualified business income for pass-through entities is increased from 20% to 23%.
• Quote: “A politically charged provision raises the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for households earning up to $500,000…” and “The estate tax exemption rises to $15 million per individual (up from approximately $13.6 million)…”
• Implication: These changes are expected to disproportionately benefit high-income earners and small business owners, while the SALT provision is controversial and seen as a “blue-state bailout” by critics.
• New Initiatives and Revenue Generation: The bill introduces novel programs and a new tax to fund domestic programs.
• Key Fact: Creates “MAGA Savings Accounts,” providing $1,000 to each child born between 2024 and 2028 in a tax-free, Treasury-managed account.
• Key Fact: Introduces a 3.5% federal tax on money transfers sent abroad (remittances).
• Quote: “A newly introduced program, MAGA (“Money Accounts for Growth and Advancement”) Savings Accounts, allocates $1,000 to each child born between 2024 and 2028.” and “A 3.5% federal tax on money transfers sent abroad is introduced…”
• Implication: MAGA accounts are billed as pro-family but criticized for their limited scope. The remittance tax is expected to generate revenue but is likely to impact immigrant communities and could face legal challenges.
• Social Program and Education Policy Reforms: The bill includes significant changes beyond the tax code.
• Key Fact: Imposes stricter work requirements for Medicaid and SNAP (food stamps).
• Key Fact: Rolls back clean energy tax credits from the Inflation Reduction Act, levies taxes on large university endowments, and threatens the tax-exempt status of nonprofits suspected of supporting terrorism.
• Implication: These changes are expected to reduce the number of eligible beneficiaries for social programs and significantly impact the energy and education sectors.
• Uncertainty in the Senate: The bill’s future in the Senate is highly uncertain, with significant modifications expected.
• Key Fact: The Senate, with a slim Republican majority, will see moderate and swing-state Senators play a decisive role.
• Key Areas of Potential Change: The SALT deduction increase, the remittance tax, deficit concerns leading to more temporary provisions or revenue offsets, and clean energy policy adjustments are likely to be debated and potentially altered.
• Quote: “While the bill passed the House largely along party lines, the Senate presents a different landscape—one where Republicans hold a slim majority and where moderate and swing-state Senators will play a decisive role.” and “The most contentious elements—such as the SALT deduction, remittance tax, and social welfare cuts—are expected to be trimmed or rewritten entirely.”
• Implication: The final shape of the bill will depend on Senate negotiations and the need to potentially utilize reconciliation rules or withstand a filibuster.

Conclusion:

The “One Big Beautiful Bill Act” represents a significant legislative effort aligned with previous tax reform goals and incorporating new populist elements. While successfully passing the House, its journey through the Senate is expected to involve substantial debate and potential revisions to address concerns regarding the federal deficit, the impact of certain provisions, and the need for broader consensus. The ultimate outcome and whether the bill lives up to its ambitious name remain to be seen as Senate negotiations unfold.

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“One Big Beautiful Bill Act” Study Guide

This guide is designed to help you review the key aspects of the “One Big Beautiful Bill Act” based on the provided source material.

Quiz

Answer each question in 2-3 sentences.

1. What is the primary stated purpose of the “One Big Beautiful Bill Act”?
2. Which existing tax legislation do some key provisions of the “One Big Beautiful Bill Act” extend permanently?
3. Describe the temporary increase in the standard deduction under this bill.
4. How does the bill change the State and Local Tax (SALT) deduction?
5. Identify three types of income exempted from federal income tax under the bill.
6. How does the bill impact the estate tax exemption?
7. What is a MAGA Savings Account, as introduced in the bill?
8. What new tax is introduced on money transfers sent abroad?
9. Describe one proposed change to social programs included in the bill.
10. What is one significant concern regarding the bill’s projected impact on the federal deficit?

Quiz Answer Key

1. The primary stated purpose of the “One Big Beautiful Bill Act” is to provide bold economic stimulus, tax relief, and enact controversial social policy shifts. It aims to rewrite significant portions of the U.S. tax code.
2. The “One Big Beautiful Bill Act” permanently extends many of the individual tax rate cuts and the doubling of the standard deduction originally enacted under the 2017 Tax Cuts and Jobs Act (TCJA).
3. From 2025 through 2028, the standard deduction is increased by $1,000 for single filers and $2,000 for joint filers, offering temporary tax relief.
4. The bill significantly raises the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for households earning up to $500,000, providing a benefit to taxpayers in high-tax states.
5. The bill exempts from federal income tax tips, overtime pay, and car loan interest, primarily benefiting workers in specific sectors with irregular income.
6. The bill increases the estate tax exemption significantly from approximately $13.6 million to $15 million per individual, adjusted annually for inflation, which benefits high-net-worth individuals and families.
7. A MAGA Savings Account is a new program allocating $1,000 to each child born between 2024 and 2028, intended as a tax-free, Treasury-managed savings account.
8. The bill introduces a new 3.5% federal tax on money transfers sent abroad, aimed at curbing capital outflows and generating revenue for domestic programs.
9. One proposed change to social programs is the imposition of stricter work requirements for receiving benefits from Medicaid and SNAP (food stamps).
10. A significant concern regarding the bill’s projected impact on the federal deficit is its estimated addition of $3.8 trillion, leading some Senators to push for more temporary provisions or revenue offsets.

Essay Format Questions

These questions require a more detailed and analytical response based on the provided text. Do not supply answers.

1. Analyze the intended economic and social impacts of the “One Big Beautiful Bill Act” based on the described key tax law changes and additional provisions.
2. Discuss the potential challenges and modifications the “One Big Beautiful Bill Act” is likely to face in the Senate, citing specific examples of contentious provisions.
3. Evaluate the arguments for and against the expanded State and Local Tax (SALT) deduction and the tax on remittances, considering their potential beneficiaries and opponents.
4. Compare and contrast the perceived benefits and criticisms of the temporary provisions (like the boost to the standard deduction and Child Tax Credit) versus the permanent provisions (like the extension of the 2017 tax cuts).
5. Based on the political outlook presented, predict which aspects of the bill are most likely to survive Senate negotiations and which are most likely to be significantly altered or removed.

Glossary of Key Terms

• One Big Beautiful Bill Act: The sweeping legislative package passed by the U.S. House of Representatives on May 22, 2025, aimed at rewriting significant portions of the U.S. tax code.
• Tax Cuts and Jobs Act (TCJA): The 2017 tax legislation whose individual provisions, including tax rate cuts and the doubled standard deduction, are permanently extended by the “One Big Beautiful Bill Act.”
• Standard Deduction: A flat amount taxpayers can subtract from their adjusted gross income, reducing the amount of income subject to tax. The bill temporarily increases this amount.
• Child Tax Credit: A tax credit for qualifying children that reduces a taxpayer’s income tax liability. The bill temporarily increases this credit.
• State and Local Tax (SALT) Deduction: An itemized deduction allowing taxpayers to subtract certain state and local taxes paid from their federal taxable income. The bill significantly raises the cap on this deduction.
• Remittances: Money transfers sent by individuals in one country to recipients in another country. The bill introduces a federal tax on these transfers sent abroad.
• Estate Tax Exemption: The threshold amount of an estate’s value that is not subject to federal estate tax. The bill raises this exemption amount.
• Enhanced Small Business Deduction: An increase in the deduction for qualified business income from pass-through entities. The bill increases this deduction from 20% to 23%.
• MAGA Savings Accounts: A newly introduced program allocating $1,000 to children born between 2024 and 2028 as a tax-free, Treasury-managed savings account.
• Medicaid: A federal and state program that provides health coverage to eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities. The bill proposes stricter work requirements for beneficiaries.
• SNAP (Supplemental Nutrition Assistance Program): A federal program that provides food assistance to eligible low-income individuals and families. The bill proposes stricter work requirements for beneficiaries.
• Sunset Clause: A provision within legislation that states an expiration date for a particular law or program, after which it is no longer effective unless extended. The Senate may add more of these to the bill.
• Reconciliation Rules: A process in the U.S. Senate that allows certain budget-related legislation to pass with a simple majority vote (51 votes), bypassing the filibuster requirement of 60 votes.
• Filibuster: A procedural tactic in the U.S. Senate used to delay or block a vote on a bill or other measure by extending debate. Overcoming a filibuster typically requires 60 votes.