Senate Narrowly Passes Major Tax Overhaul: Here’s What It Means for You
In a 51-50 vote, with Vice President J.D. Vance casting the tie-breaking vote, the Senate passed its version of a sweeping tax and spending bill that’s poised to reshape the tax code for years to come. If signed into law, this would be the most significant tax legislation since 2017, making permanent many provisions originally set to expire after 2025.
The Senate version, just like the House version, permanently extends the lower individual income tax rates originally enacted under the 2017 Tax Cuts and Jobs Act, which are set to expire after 2025. Without this change, tax brackets would revert to higher pre-2017 levels.
For example, the 12% bracket would return to 15%, the 22% to 25%, and the top rate from 37% to 39.6%. By locking in the lower rates, the bill prevents a broad tax increase scheduled for 2026. The legislation also adds one additional year of inflation adjustment for all brackets except the top one, modestly raising income thresholds and allowing more income to be taxed at lower rates. This change offers long-term rate certainty for individual taxpayers and preserves the current structure of marginal tax brackets.
The bill also addresses estate planning by permanently raising the estate and gift tax exemption. It doubles the exemption, shielding estates up to $15 million for individuals (or $30 million for married couples), and indexes that amount to inflation going forward. This marks a significant planning opportunity for high-net-worth individuals and families.
Other headline provisions include new deductions for tips, overtime, and car loan interest; a modest increase to the child tax credit; and permanent tax relief for pass-through businesses.
The Congressional Budget Office projects that the bill will add nearly $4 trillion to the federal deficit over the next decade. House members remain divided over key provisions, including the long-term impact on deficits, healthcare-related funding, and the $40,000 Senate-proposed SALT deduction cap, which is set to phase back down to $10,000 by 2029—unlike the House version, which made the higher cap permanent.
The Senate bill also raises the Child Tax Credit by $2,200, slightly less than the House’s proposed $2,500 increase. The House must now decide whether to pass the Senate version as-is or push for revisions before it reaches the White House. Rep. Chip Roy remarked that the bill’s chances of passing are “a hell of a lot lower than they were even 48 hours ago,” while Minority Leader Hakeem Jeffries called it “the one big ugly bill.” Observers expect the legislation to face continued scrutiny. For individuals, families, and business owners, it marks a significant shift in tax policy—one that carries both opportunities and risks.
Sources:
https://thehill.com/homenews/house/5353494-salt-caucus-republicans-senate-big-beautiful-bill
Michael T. Cyrs
Senior Director of Wealth Transfer
JD, CFP®, MBA