A Guide To The Tax Cuts In (And Out) Of Trump’s ‘Big, Beautiful Bill’

President Donald Trump got his “big beautiful bill”—at least in the draft version—and it certainly lives up to the moniker. The tax portion of the bill will cost $3.7 trillion over the next decade, according to the Joint Committee on Taxation (JCT).

The draft bill (and subsequent markups) would make permanent a number of the expiring tax cuts contained in Trump’s signature 2017 tax legislation— the Tax Cuts and Jobs Act (TCJA). It would also sweeten some of those cuts. The beneficiaries of the most recent proposal are largely individuals. But that’s because in the TCJA, many of the tax benefits for individuals were set to expire at the end of 2025, while the corporate tax breaks were largely permanent. In the new bill, some of the tax cuts are again set to expire, typically after the current administration leaves office. Here’s a look at some of the highlights.

Individual Tax Provisions

Income Tax Rates. We currently have seven (7) tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top rate, in particular, reflects a reduction as a result of the TCJA.

• The draft bill would make those personal income tax rates and brackets permanent beginning in 2026.

Capital Gains. If you hold assets for one year or less, any capital gain at sale or disposal is considered short-term and generally taxed at your ordinary income tax rate. If you hold assets for more than one year before you get rid of them, your capital gain is called long-term and is taxed at rates of up to 20%.

• Under the draft bill, the same capital gains rates will apply, but the brackets will be adjusted.

Standard Deduction. The TCJA doubled the standard deduction amounts from the earlier levels—but that was temporary. For 2025, the standard deduction was $15,000 for individuals and married couples filing separately, $30,000 for married couples filing jointly, and $22,500 for heads of household.

• Under the draft bill, the doubling of the standard deduction would be made permanent. Additionally, the standard deduction amounts would be subject to a temporary additional increase of $1,500 in the first year and $1,000 in future years, but only for four years beginning in 2025. The JCT estimates this would add $1.3 trillion to the deficit.

Additional Standard Deduction. If you are over age 65 or blind in 2025, you can tack on $1,600 to your standard deduction ($2,000 for unmarried taxpayers).

• Under the draft bill, seniors would be eligible to claim a new, temporary deduction of $4,000 beginning in 2025—the deduction would expire in 2028. The deduction would be available to taxpayers who itemize and those who claim the standard deduction. It phases out with income over $150,000 for taxpayers filing jointly and $75,000 for all other taxpayers. The deduction would last from 2025 through 2028. This appears to be a nod to Trump’s pledge to end federal taxes on Social Security, which did not make it into the draft bill. According to the JCT, the enhanced deduction will cost $71 billion.

Personal Exemptions. Currently, the personal exemption amount for yourself, your spouse, and each of your dependents is zero—that was a change under the TCJA.

• Under the draft bill, personal exemptions would be permanently repealed.

Mortgage Interest Deduction. Currently, you may only deduct interest on acquisition indebtedness—your mortgage used to buy, build, or improve your home—up to $750,000, or $375,000 for married taxpayers filing separately. As a nod towards mortgages in effect before the TCJA, taxpayers with mortgage debt incurred on or before December 15, 2017, may deduct interest on the first $1 million of debt—or $500,000 for married taxpayers filing separately—of combined mortgage debt. Importantly, the deduction for interest on home equity debt (meaning re-fis not related to improving your home) was eliminated. Those caps are set to expire at the end of 2025.

• Under the draft bill, the new lower mortgage cap that was set to expire is made permanent.

State and Local Tax Deductions. Currently, if you itemize your deductions, you can deduct state and local income taxes or sales taxes, and you can deduct state and local property taxes only up to a $10,000 cap, often referred to as the SALT cap. The SALT cap is a result of the TCJA and is set to expire at the end of 2025.

• Republicans were still negotiating the SALT provision Tuesday night. But under the draft bill, the cap on deductions for state and local taxes (SALT) paid would be extended past its planned expiration at the end of this year, though the current $10,000 cap will be boosted to $30,000 for taxpayers filing jointly and $15,000 for individuals. However the new higher cap would only be available to those with a modified adjusted gross income (MAGI) of up to $400,000—lower caps would apply to higher income taxpayers. (Some Republicans want to see the cap hit $60,000.)

Casualty and Theft Losses. Under the TCJA, the deduction for personal casualty and theft losses was repealed except for losses attributable to a federal disaster area through 2025.

• Under the draft bill, the limitations would be made permanent.

Miscellaneous Itemized Deductions. Before the TCJA, if you itemized your deductions, you could deduct those miscellaneous deductions that exceeded 2% of your adjusted gross income (AGI). Under the TCJA, those deductions, including unreimbursed employee expenses, home office expenses, and tax preparation expenses, were temporarily eliminated through the end of 2025.

• Under the draft bill, miscellaneous itemized deductions would be permanently eliminated.

Pease Limitations. The so-called Pease limitations are named after former Rep. Don Pease (D-OH) and cap or phase out some itemized deductions once AGI reaches certain limits (deductions not subject to the limitation include medical and dental expenses, charitable contributions, casualty and theft losses, and gambling losses). Under the TCJA, there is no overall limitation on itemized deductions.

• Under the draft bill, the limitations would be eliminated permanently. In its place, according to the GOP proposal, the value of itemized deductions would be limited to 35 cents on the dollar, essentially resulting in a small haircut for taxpayers at the highest marginal rate.

Bicycle Expense Reimbursements. Under the TCJA, employer reimbursements for bicycle commuting expenses are considered income and subject to tax.

• Under the draft bill, there is no exclusion for reimbursements—they would all be taxable.

Moving Expense Reimbursements. Currently, only members of the armed forces can exclude employer reimbursements for moving expenses due to a change in employment—the previous rule that allowed all eligible taxpayers to claim the exclusion was eliminated under the TCJA.

• Under the draft bill, this provision would be extended so the tax treatment will not change.

Gambling Losses. Under the TCJA, eligible taxpayers can deduct gambling losses to the extent they do not exceed their winnings (winnings must be reported as income)—they can also deduct related expenses. If the provision were allowed to expire, gambling losses would no longer include related expenses for casual gamblers (pros will still be able to deduct ordinary and necessary expenses).

• Under the draft bill, this provision would be extended so the tax treatment will not change.

Alternative Minimum Tax (AMT). The AMT is a secondary tax put in place in the 1960s to prevent the wealthy from artificially reducing their tax bill through the use of tax preference items. Under the TCJA, the AMT exemption amount increased and was adjusted for inflation. The AMT exemption amount for tax year 2025 for single filers is $88,100 and begins to phase out at $626,350, while the exemption amount for married couples filing jointly is $137,000 and begins to phase out at $1,252,700.

• Under the draft bill, the increased AMT exemption rate (and phaseout thresholds) would be made permanent. According to the JCT, this would reduce revenues by $1.4 trillion.

Student Loans. Under current law, student loans that are discharged due to death or disability may qualify for an exclusion from gross income (normally, discharges of debt are considered taxable).

• Under the draft bill, this provision would be extended so the tax treatment will not change.

Child Tax Credit. The child tax credit helps families get a tax break of up to $2,000 per qualifying child. The child tax credit is income-dependent and subject to phase-out. For married taxpayers filing a joint return, the phase-out begins at $400,000—it’s $200,000 for all other taxpayers. Phase-outs mean that the credit is reduced as your income increases. In this case, the reduction is $50 for each $1,000 by which your modified adjusted gross income, or MAGI, exceeds the threshold amount.

• Under the draft bill, the credit would temporarily increase to $2,500 per child, but only for four years (interestingly, that amount is below the inflation-adjusted value of $2,000 from 2018). The credit would drop back to $2,000 after that time. The bill would also require that the child have a valid Social Security number to qualify—a provision that already exists—and would require both parents to have a valid Social Security number. According to the JCT, the expansion will cost the government nearly $800 billion, while the Social Security number requirements for parents would mean two million fewer children would be eligible.

Credit For Other Dependents. The TCJA also introduced the credit for other dependents. It’s a nonrefundable credit of up to $500 for qualifying dependents other than qualifying children. In other words, it’s intended to cover dependents who can’t be claimed for the CTC. It is sometimes referred to as a “family credit.”

• Under the draft bill, the credit would no longer exist.

Federal Estate Taxes. Under the TCJA, the federal estate tax remained in place, but the federal estate exemption amount doubled. For 2025, the exemption amount for decedents is $13,990,000 per person or $27,980,000 per married couple. It was set to revert to its pre-TCJA dollars—about half the current amount—at the end of 2025.

• Under the draft bill, the exemption boost has been made permanent, with the exclusion amount being $15,000,000 in 2026 and adjusted for inflation thereafter.

Corporate-Related Tax Provisions

Pass-Through Entities. Businesses use structures like limited liability companies (LLCs) or S corporations to pass income through to the owners without paying tax at the company level. Instead, income is taxed at individual rates. Currently, owners of pass-through companies AND sole proprietors are taxed at their individual tax rates, less a 20% deduction (to bring the rate lower) for business-related income, subject to certain wage limits and exceptions. This provision is referred to as the pass-through entity deduction or the Section 199A deduction and is set to expire at the end of 2025, thanks to the TCJA.

• Under the draft bill, the deduction would be made permanent and the rate of the deduction would increase from 20% to 23% beginning in 2026. The bill would also extend eligibility to certain interest dividends paid by qualified business development companies. According to the JCT, growing the deduction for pass-through businesses will cost about $700 billion.

GILTI and Other Foreign Income Provisions. The TCJA marked a dramatic change in how foreign profits were taxed. For years, the U.S. had struggled with how to treat companies that earned profits overseas. Generally, our global tax system imposes tax on all income earned by U.S. taxpayers, no matter where earned. However, in some circumstances, companies could avoid U.S. tax by holding foreign profits overseas indefinitely. The TCJA made significant changes to encourage companies to repatriate earnings. And to ensure that foreign profits that had not yet been taxed didn’t completely escape tax, the new law imposed a tax on existing foreign profits that had not yet been repatriated.

• Under the draft bill, a tax break for offshore profits (the wonderfully-named global intangible low-taxed income, or GILTI deduction) would be made permanent, effectively taxing the foreign profits of American corporations half as much as domestic profits, would be made permanent. Additionally, foreign-derived intangible income (FDII) and base erosion and anti-abuse tax (BEAT) rates would also be made permanent.

Expensing. Businesses must generally write off the costs of assets over their “useful life”—a number of years based on the kind of asset. With bonus depreciation, businesses can immediately deduct those costs, subject to certain limits. Under the TCJA, 100% bonus depreciation was only allowed through 2023, subject to a phaseout that would allow a deduction for 80% of costs in 2023 and 60% in 2024.

• Under the proposal, 100% expensing of qualified assets would be reinstated, but only temporarily—for property acquired between January 20, 2025, and 2029.

Research and Development. Under current law, the R&D credit allows businesses to write off qualifying R&D expenditures—but they must amortize those costs over five years. The credit had expired.

• Under the proposal, domestic R&D expenses would be immediately deductible for the tax years 2025 through 2029. The proposal would not provide full expensing for foreign R&D expenditures.

Non-Profit and Tax Exempt Provisions

Higher Taxes For Colleges. As part of the TCJA, some universities were subject to a 1.4% tax on the net investment income from their endowments.

Higher Taxes For Private Foundations. Currently, certain private foundations pay a 1.39% tax on their assets.

• Under the proposal, the rate would climb to 10%, depending on the foundation’s assets. The top rate of 10% would apply to foundations with assets of $5 billion or more.

New Tax Provisions

The draft bill also included some new provisions, too, that were not part of the TCJA. Those include:

• Money Accounts For Growth And Advancement (“MAGA” Accounts). The bill proposes a new tax-favored account to benefit children under age eight. Parents would be able to contribute up to $5,000 per year to the account, and money could not be withdrawn before the beneficiary turns 18. After that, money can be used to pay for college, a first-time home purchase, or to start a business—with withdrawals taxed at favorable capital gains rates. And while there won’t be $5,000 checks for new babies, there would be a temporary plan to allow for government deposits of $1,000 for qualifying children born between December 31, 2024, and January 1, 2029.
• No Tax On Tips. Tip income would be temporarily deductible—only for tax years 2025 through 2028—for individuals in traditionally and customarily tipped industries who do not itemize. Highly compensated employees (those who make more than $160,000 in 2025) would be excluded. The JCT estimates this will cost $40 billion.
• No Tax On Overtime. Workers who receive overtime would not have to pay taxes on that extra compensation. It would also apply to taxpayers who do not itemize and would also be temporary—only for tax years 2025 through 2028. According to the JCT, this will cost $124 billion.
• No Taxes On Car Loan Interest. Car loan interest used to be deductible until 1986, when Congress decided that it, along with other consumer loan interest, encouraged spending and discouraged saving. Now, a temporary provision would make auto loan interest deductible (but only for cars assembled in the U.S.) in tax years 2025 through 2028. The deduction would be limited to $10,000 and subject to phase-outs for those with income above $100,000 for single filers ($200,000 for married taxpayers filing jointly). The JCT estimates this provision would cost $57 billion.

What Else To Know

To help pay for the bill, the GOP has proposed cuts to Medicaid. The Congressional Budget Office (CBO) says the cuts will result in 10.3 million people losing coverage and 7.6 million people becoming uninsured. The provision would save $625 billion, which is why it’s under consideration.

What got axed? Several Inflation Reduction Act (IRA) tax breaks got the boot, including green energy credits. According to the JCT, these moves will increase revenues by over $300 billion.

What didn’t get a mention? So far, there’s no indication that corporate tax rates will be cut. Also missing? No mention of taxing the carried interest income earned by private fund managers at ordinary income tax rates, instead of as capital gains—something Trump has repeatedly said he wants to do.

You can see the original draft version of the bill before the markup here.

The bill is certain to face some opposition in the House, where Republicans hold a slim majority. And the business-friendly Senate may look to add or extend business-related tax breaks, which would add to the cost unless additional cuts are made elsewhere. The draft also allows for a $4 trillion debt ceiling hike, which fiscal conservatives may oppose.

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