Senate passes ‘Big Beautiful Bill,’ makes litany of significant tax changes

The Senate passed President Donald Trump's controversial budget today, which makes significant changes to tax policy and extends the 2017 Tax Cuts and Jobs Act.

The so-called "One, Big Beautiful Bill" passed on a 51-50 vote after three Republicans defected, requiring Vice President JD Vance to break the tie and send the bill back to the House for final approval but where the outcome remains uncertain.

Senate Majority Leader John Thune of South Dakota spent the night reaching for last-minute agreements between those in his party worried the bill’s reductions to Medicaid will leave millions without care and his most conservative flank, which wants even steeper cuts to hold down deficits ballooning with the tax cuts.

It’s a pivotal moment for the Republicans, who have control of Congress and raced to wrap up work with just days to go before Trump’s holiday deadline Friday. The 940-page “One Big Beautiful Bill Act,” as it’s formally titled, has consumed Congress as its shared priority with the president.

At the same time, House Speaker Mike Johnson of Louisiana has signaled more potential problems ahead, warning the Senate package could run into trouble when it is sent back to the House for a final round of voting, as skeptical lawmakers are being called back to Washington ahead of Trump’s Fourth of July deadline.

Trump acknowledged it’s “very complicated stuff,” as he departed the White House for Florida.

“We’re going to have to see the final version,” the president said. “I don’t want to go too crazy with cuts. I don’t like cuts.”

Senate's tax changes

Tax changes include:

• Income tax brackets from the 2017 Tax Cuts and Jobs Act (12%, 22%, etc.) are made permanent, including inflation indexing through 2029.
• Raises the standard deduction to $15,750 (single), $23,625 (head‑of‑household), and $31,500 (married filing jointly), retroactive to 2025 with inflation adjustments.
• Temporarily increases the SALT deduction cap from $10,000 to $40,000 (indexed) through 2029, then reverts to $10k in 2030. A 30% phase‑down applies above certain incomes.
• Eliminates federal income tax on certain tips and overtime pay, fulfilling a Trump campaign pledge.
• Makes the 20% pass‑through deduction (Section 199A) permanent and broadens income phase‑in thresholds for eligibility.
• Removes the overall limitation on itemized deductions (formerly the “Pease limitation”) and introduces a new cap mechanism.
• Solidifies corporate tax benefits—bonus depreciation, R&D incentives, interest deduction limits—as permanent instead of temporary.
• Sets the Child Tax Credit at $2,200 per child (up from $2,000), permanent but less generous than the House version’s $2,500.
• Enhances the business tax credit available for employer-sponsored child care (details to follow via Senate Finance).
• Creates tax-exempt savings accounts for children with a $1,000 federal seed and a $5,000 annual cap.
• Increases the federal estate and gift tax exemption to $15 million per person ($30 million for couples), indexed to inflation beginning in 2026.
• Exempts 50% of capital gains (up to $15 million) on certain small business stock held for 3+ years.

Fiscal conservatives said the cuts didn't go far enough and complained the legislation adds $3.3 trillion to the national deficit over a decade and requires a $5 trillion increase in the debt ceiling.