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By Jonathan Tucker | Principal, Research & Development Tax Credits
House Ways and Means Committee Chairman Jason Smith (R-MO) released 28 pages of proposed tax legislation on May 9, 2025, as part of the FY 2025 budget reconciliation process. These initial proposals focus primarily on extending or modifying provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that are currently set to expire after 2025.
Most notably, the bill does not yet address bonus depreciation, Section 174 research and experimental expensing, and the SALT cap relief. However, House Republicans from high-tax states are demanding that the SALT cap be addressed in final negotiations, and many industry associations, as it relates to bonus depreciation and Section 174 research and experimental expensing.
KBKG Insight:
It is expected that bonus depreciation, Section 174 expensing, and at least an increase in the SALT cap will be addressed with the House Ways and Means committee starting its markup on May 13, 2025.
Breaking Down What is in the Bill:
- Individual Tax Rates: Permanently extends current brackets, including the 37% top rate, with inflation adjustments.
- Standard Deduction: Makes the higher deduction permanent and includes a temporary increase from 2025 to 2028.
- Child Tax Credit: Keeps the $2,000 credit permanent, temporarily raises it to $2,500, and requires valid Social Security numbers and legal status.
- Section 199A Deduction: Makes the 20% deduction for pass-through businesses permanent, increases it to 22%, and adjusts thresholds.
- Estate & Gift Tax: Keeps the doubled exemption amount, raising it to $15 million.
- Alternative Minimum Tax (AMT): Maintains higher exemption levels.
- Other Provisions: Permanently extend limits on deductions for mortgage interest, moving expenses, and more. Personal exemptions remain repealed.
What to Expect Next
The House Ways and Means Committee is expected to release more tax provisions this week, including other Trump proposals such as no tax on tips, no tax on social security, interest deductions on domestically made automobiles, along with possible changes to “green energy” credits. The House Ways and Means Committee begins formal “markup” hearings on May 13.
However, the full package faces several challenges:
- The Republican House budget allows $4.5 trillion in tax cuts only if $2 trillion in mandatory spending cuts are achieved. Without those cuts, the cap drops to $4 trillion.
- The Republican Senate is using a different method of measuring costs that can be problematic for House members.
- There are intra-party divisions among House Republicans as it pertains to deficit hawks, moderate Republicans, and other Republicans.
- Some proposals could be scaled back or made temporary depending on budget trade-offs.
- The debt ceiling deadline looms: Treasury projects the government could run out of borrowing capacity by mid-July, adding urgency to wrap up reconciliation before the July 4, 2025, recess.
Conclusion
If passed, these changes would have long-term implications for individuals, pass-through entities, and multinational corporations. KBKG and its experts specialize in navigating complex tax legislation and translating policy shifts into practical, strategic solutions. Those with questions about current tax incentives and benefits are encouraged to contact a KBKG expert today.
About the Author
Jonathan Tucker | Principal – Research & Development Tax Credits
Jonathan Tucker is based in Atlanta, GA, and has over 20 years of experience providing federal business tax advisory services, primarily in R&D tax credits, to clients in various industries including technology, manufacturing, transportation, healthcare, retail and consumer products, hospitality, media and entertainment, financial, and other professional services industries. Read More