The One Big, Beautiful Bill
Quick Take
The House of Representatives passed a sweeping tax bill aimed at extending and expanding key provisions from the Tax Cuts and Jobs Act of 2017
The proposed legislation provides new tax savings opportunities, like an auto loan interest deduction and increased contribution limits for Health Savings Accounts (HSAs)
While not yet law, the bill offers an early glimpse into potential changes that could shape tax planning for 2026 and beyond.
On May 22, the House of Representatives passed a major tax bill called “The One Big, Beautiful Bill.” The goal is to extend and expand specific provisions of the Tax Cuts and Jobs Act (TCJA), which are set to expire at the end of the year. The bill provides a clearer view of potential tax changes, although some key issues — such as the cap on state and local tax deductions, energy tax credits, and the bill’s overall cost — remain under debate. While there is no guarantee it will become law in its current form, the proposal provides taxpayers with a proper early look at what to watch as we head toward year-end.
Tax Brackets
The proposed legislation would permanently extend the tax brackets created under the Tax Cuts and Jobs Act. (10% - 12% - 22% - 24% - 32% - 35% - 37%)
Estate & Gift Tax Exemption
The Tax Cuts and Jobs Act doubled the estate and gift tax exemption in 2018.
Annual inflation adjustments have moved the exemption to its current amount of $13.99 million.
Absent additional legislation, the exemption amount would revert to pre-2018 levels. Based on inflation, the exemption amount would revert to approximately $7 million.
The proposed bill would prevent the exemption’s reduction and would be increased to $15 million in 2026.
Standard Deduction
The proposed legislation would permanently increase the standard deduction, which is $15,000 for single tax filers and $30,000 for joint filers.
The standard deduction would receive an annual inflation adjustment plus $1,000 for single filers and $2,000 for joint taxpayers each year through 2028.
Current tax law provides taxpayers 65 and above, or blind, with an additional standard deduction of $2,000 for single and head of household filers or $1,600 per eligible spouse for those filing a joint return. The proposed tax bill provides an additional $4,000 deduction per person. There is an income phaseout for this bonus deduction; however, the bonus deduction could increase the standard deduction amount as high as $43,200 for taxpayers filing a joint return.
Child Tax Credit
Under the Tax Cuts & Jobs Act, the child tax credit was $2,000 per qualifying child.
Proposed legislation would increase the child tax credit to $2,500 per qualifying child through 2028.
The credit would revert to $2,000 in 2029; however, it would be indexed for inflation using 2024 as the base amount.
State and Local Tax Deduction (SALT)
The Tax Cuts & Jobs Act limited the deduction for state and local taxes to $10,000.
The House committee bill would increase the SALT cap to $40,000; however, the deduction would be subject to an income-based phasedown.
Each dollar earned above $500,000 would reduce the deduction by 30 cents.
Households with an income of $600,000 or greater would be subject to the current SALT cap of $10,000.
The SALT cap has been one of the most heavily debated provisions in the bill, and there will likely be additional updates before ratification.
Auto Loan Interest Deduction
The proposed legislation provides a new deduction, which allows taxpayers to deduct up to $10,000 in auto loan interest on vehicles purchased after December 31, 2024.
The deduction is available for personal use vehicles (cars, ATVs, campers, and trailers); however, the vehicle must have been assembled in the United States to qualify.
Single taxpayers and joint taxpayers are eligible for this deduction if their income does not exceed $149,000 and $249,000, respectively.
The deduction is an ‘above the line’ deduction, which means taxpayers do not need to itemize their deductions to receive this deduction.
Health Savings Accounts
Current law permits eligible HSA owners enrolled in self-only coverage to contribute $4,300 for the 2025 tax year. Those enrolled in high-deductible family coverage plans may contribute $8,550 per year.
In addition to the annual inflation adjustment, the proposed legislation would double the contribution limit for many owners of Health Savings Accounts. The additional contribution would be subject to the following income-based phaseouts:
Joint taxpayers with family coverage: $150,000 – $200,000
All other taxpayers: $75,000 – $100,000
Taxpayers with modified adjusted gross income within the phaseout will be allowed to contribute a percentage of the additional contribution amount; however, households with income above those amounts will not be able to make additional contributions.
Final Thoughts
The final shape of the bill will ultimately depend on how negotiations unfold in the Senate, particularly regarding high-cost provisions such as the expanded deduction for state and local taxes. Although the current bill may not be in its final form, the foundation for year-end tax planning has become clearer. We are monitoring legislative developments and will provide updates as the bill progresses towards becoming law. If lawmakers stick to their proposed timeline, we should have a meaningful window to review any planning opportunities before the new bill takes effect in 2026.
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