Trump Tax Bill Passed by the Senate: What’s In It?

President Donald Trump’s multi-trillion dollar tax and spending bill is one step closer to becoming law after it passed the Senate vote Tuesday, July 1, 2025.  Here I cover (and simplify) what’s in the Bill.

SALT Deduction

The Senate legislation incorporates a deal to raise the limit on the state and local tax (SALT) deduction to $40,000 annually for a five-year period. The write-off would phase out for taxpayers who make more than $500,000 per year. After the five-year period, the limit would snap back to the current $10,000 limit imposed in the 2017 tax law.

The Senate also dropped new limits House Republicans had put on pass-through businesses’ deductions of state and local taxes. Some business owners don’t need to abide by the SALT cap that applies to everyone else, thanks to legal workarounds approved by legislatures in New York, New Jersey, Connecticut, California and dozens of other states.

No Tax On Tips

Workers would be exempt from taxes on tip income up to $25,000 per individual, as well as overtime up to $12,500 per individual and $25,000 per couple. The tax breaks run through 2028. Those deductions start to phase out at $150,000 in income per person.

Medicaid Cuts

The measure would create new work requirements for Medicaid recipients, unless they are elderly, disabled or have children under 14 years old. Medicaid beneficiaries who gained eligibility through the Affordable Care Act would have to pay a share of costs through charges like co-pays.

The measure would put a new limit on a mechanism nearly all states use to increase federal Medicaid funding. The legislation would cap so-called provider taxes that states use toward defraying their Medicaid matching fund requirements, allowing them to bring in more federal money to make Medicaid payments to providers and expand coverage.

The cap would be phased in beginning in 2028 for states that expanded Medicaid coverage for low-income people under the Affordable Care Act. According to the nonpartisan health policy research group KFF, 40 states and the District of Columbia have done so.

Renewable Power

GOP senators adjusted a phase-out of an electricity tax credit benefiting wind and solar power projects. The ventures generally would have to be in service by the end of 2027 to receive the subsidy, but the Senate-passed bill makes an exemption for qualifying projects that begin construction within a year after the measure’s enactment.

The change would effectively mean that developers starting construction before mid-2026 would have another four years to build and receive the credit. That’s far more generous than the House-passed bill and a previous Senate version tethered to a placed-in-service deadline.

Electric Vehicles

A popular $7,500 tax credit for consumer purchases of new and used electric vehicles would end on Sept. 30, 2025, earlier than previous versions of the bill that would have eliminated the credit at the end of the year.

Auto Loan Tax Deduction

A deduction up to $10,000 would be established for interest payments on auto loans from 2025 through 2028. The tax break is only eligible for new vehicles whose final assembly is in the US.

Permanent Business Tax Breaks

Three business tax deductions would be made permanent. That includes (1) the ability to use depreciation and amortization as the basis for interest expensing, (2) the research and development (R&D) write-off and (3) a 100% bonus depreciation of certain property, including most machinery and factories.  As a result, business owners will be interested in continuing their investments in R&D functions, and banks should see an increase in lending to businesses for equipment investments.

Family Benefits

The maximum Child Tax Credit would rise to $2,200 per child from $2,000.  It is also made permanent and is adjusted for inflation.  Parents, relatives and others would be able to contribute up to $5,000 in total annually to tax-deferred “Trump” investment accounts for children until they turn 18.

Children who are US citizens born from 2025 through 2028—essentially, during Trump’s current term—would get a $1,000 contribution into their accounts from the federal government.

Endowment Tax

The current 1.4% tax on net investment income of private college and university endowments would go up for better-funded institutions. The new tiered tax rate structure would climb as high as 8% for colleges with the most endowment income per student.

Immigration

The president’s crackdown on undocumented migrants would get $45 billion for detention centers and nearly $47 billion for infrastructure at the southern border, including wall construction.

I am actively following this legislation as it now moves back to the House of Representatives.  For more information, please do not hesitate to contact me at bcaroprese@caroprese.com