The House-passed version of the Trump administration's "Big Beautiful Bill," now in the Senate, is almost certain to pass in one form or another, despite threats by budget hawks to oppose it if certain cuts are not made, and by blue state Republicans who want different ceilings on the state and local tax deduction.
The alternative — a significant tax hike at the end of the year — is, for many, too radical to contemplate. Nevertheless, the time between now and the vote to finalize it will see extreme bargaining and chipping away at various provisions to make it palatable to various factions in both the Senate and the House. It may, however, be difficult to meet President Trump's desire to have it on his desk awaiting his signature by July 4.
"It's tough to spend a lot of time on a proposal until it has been approved," said Stephen Mankowski, past president of the National Conference of CPA Practitioners. "Over the past several weeks, AICPA committees have been going over the provisions, and finding some good, and others not so good. Whatever it is, we know something will pass, because otherwise all of the Tax Cuts and Jobs Act provisions will expire at the end of the year. In a lot of cases, what this does is make some things permanent. It will be interesting to see how things will flow out of the Senate. Other than non-useful information that we see with people picking certain little clauses, there hasn't been a lot of press about the bill."
The exemption from tax of tips and overtime pay is in the bill, but the exemption of Social Security benefits is not.
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Mankowski named the decoupling of theft losses from the federally declared disaster requirement as a needed legislative priority, given the proliferation of cyber-crime. He cited the NCCPAP agenda for its 2025 meeting: "Unreimbursed personal theft losses due to cyber-crime are not deductible unless they are due to a federally declared disaster. The impact is magnified when retirement funds are lost, requiring the amount to be included in income as a distribution from a retirement plan along with possible exposure to a 10% excise tax if the distribution occurred prior to the taxpayer reaching age 59½."
Mankowski remarked that although the proposed legislation does not eliminate the tax on Social Security benefits, an increase in the senior citizen standard deduction by $4,000 would help offset some but not all of the tax on Social Security. But it would be beneficial to file separately if one spouse is working and the other is retired.
He is happy that the legislation addresses the Form 1099-K threshold by raising it from $600 to $20,000, with a transaction threshold of 200 transactions. "That's a positive because otherwise you could sell me your desk for $600 and be required to report it on a Form 1099, whereas under the new provision you can sell an entire office of furniture and it would not be over 200 transactions," he said.
Other provisions in the House bill, according to Bill Nemeth, executive director of the Georgia Association of Enrolled Agents, include:
- Student loan debt being eliminated if the student dies;
- An increase in the Child Tax Credit to $2,500 for four years, followed by reversion to $2,000;
- The federal estate tax exemption going to $15 million;
- 529 Plan funds being allowed to be used for elementary, secondary and home-school education;
- A partial charitable deduction for non-itemizers at $300;
- The qualified business income deduction being increased to 23% (up from 20%);
- R&D expenses being immediately deductible from 2025 through 2029;
- Tip income being not taxable;
- 100% bonus depreciation being extended through 2029;
- 1099-K third-party thresholds being increased to $20,000 and more than 200 transactions;
- Trump accounts for newborns of $1,000 for children born between Dec. 31, 2024, and Jan. 1, 2029;
- No tax on overtime; and,
- No tax on car loan interest for domestically manufactured automobiles.
Pay-fors, meanwhile, include the phaseout and termination of $7,500 new and $4,000 used electric vehicle credits;
- Repeal of clean energy credits for homes at end of 2025, including for contractors that build energy-efficient homes;
- Phaseout starting in 2029 for wind, solar, and other renewables;
- Annual fees for vehicle owners highway trust fund of $ 250 for electric vehicle;
- A long list of new fees for individuals going through the immigration system; and,
- An increase in the amount of money that federal workers are required to contribute to retirement accounts from 0.85% to 4.4%.
The bill would also allow contingent fees on original returns. Both the AICPA and the NAEA oppose this item.
