The Senate is looking to trim some of Trump's favorite tax breaks

Some sad news for America's motor sports enthusiasts: The GOP's 'one big, beautiful bill' might not give you a tax break on a new four-wheeler, after all.
Senate Republicans on Monday night unveiled their version of the legislation's tax section, which includes a number of departures from the text passed by the House last month. Among them are several trims to the populist tax breaks advocated by President Trump: Cuts for workers who earn tips or work overtime get pared back some, as does a deduction for auto loan interest that lower-chamber lawmakers would have extended to ATV and RV purchases too.
Here's a quick rundown of the Senate bill and some notable tweaks. One thing to keep in mind: All these breaks end after 2028 in order to reduce their cost on paper. Most experts assume there will be some pressure to renew them.
The Senate bill includes Trump's signature campaign tax proposal, but reins it in slightly compared to the House version. It would shield up to $25,000 worth of tips from federal income taxes by letting filers deduct them from their returns. (They'd still owe Medicare and Social Security payroll taxes on those earnings). The break is available to itemizers and non-itemizers alike, but starts phasing out for individuals who earn at least $150,000 a year, or $300,000 for joint filers.
The House version is slightly more generous, placing no limit on how much tip income employees could deduct. It would bar 'highly compensated' employees from receiving the break, currently defined as individuals making more than $160,000.
To keep Americans from abusing the measure by swapping their regular salary for gratuities, the new deduction will only be available to workers in jobs 'which customarily and regularly received tips' prior to 2025, like waiters and Uber drivers. The Treasury secretary will also be required to create a list of eligible occupations.
By subscribing, you are agreeing to Yahoo's
Terms
and
Privacy Policy
The Senate also gave this break a bit of a haircut. Under its version, workers can deduct up to $12,500 worth of overtime pay from their income taxes; the benefit begins phasing out for households making over $150,000. Under the House bill, there was no limit to how much overtime households can deduct, though highly compensated employees aren't eligible.
One nuance here: Under the proposal, workers can only deduct the 50% bonus they are paid for overtime under federal labor law. In other words, the 'half' in 'time-and-a-half' would be tax-free.
Read more: What is taxable income, and how can you reduce it?
This measure will let a couple deduct up to $10,000 in annual interest from a loan used to buy a new car or motorcycle, as long as it's assembled in America, with the benefit phasing out for couples earning more than $200,000.
The big change? Unlike under the House proposal, all-terrain and recreational vehicles won't qualify for the deduction. Ohio Sen. Bernie Moreno, a former car dealer himself, had been especially critical of their previous inclusion. 'An R.V.? Motorcycles? A.T.V.s?' he told the New York Times. 'That's not the idea; the idea is to help working Americans be able to afford a car.'
Here's one tax break the Senate would make more generous: The chamber's proposal would create a new, temporary $6,000 deduction for senior citizens, phasing out for individuals making more than $75,000 or couples earning more than $150,000. The House version, meant to replace Trump's much more sweeping and expensive call to end taxes on Social Security, is just $4,000.
Read more: 4 ways to save on taxes in retirement
The fate of the State and Local Tax Deduction is still one of the biggest and most politically consequential questions hanging over this legislation. In the House, blue state Republicans successfully negotiated to lift the current $10,000 cap, which was put in place as part of the 2017 Tax Cuts and Jobs Act, up to $40,000 a year.
The Senate GOP, which doesn't include any members from high-tax New York or California, has looked to lower that ceiling back down a bit to reduce their legislation's cost. Currently, the Senate bill would leave the cap at $10,000, but that's seen as a placeholder until lawmakers can negotiate a final number. Republican House members from New York have already started firing warning shots.
'After engaging in good faith negotiations, we were able to increase the cap on SALT from $10,000 to $40,000,' New York Rep. Mike Lawler posted on X. 'That is the deal and I will not accept a penny less. If the Senate reduces the SALT number, I will vote NO and the bill will fail in the House.'
Jordan Weissmann is a senior reporter at Yahoo Finance.
Sign up for the Mind Your Money newsletter

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

CNN

9 minutes ago

• CNN

Hundreds of Americans have fled Iran and others face difficulties leaving as Trump weighs US military action

Hundreds of Americans have fled Iran as the conflict with Israel has escalated, an internal State Department report said. The detail in the Friday situation report underscores that US citizens in Iran are at risk as President Donald Trump weighs US military action. The exact number of Americans in Iran is not known, and the State Department does not require US citizens to register their presence abroad. Unlike in Israel, where the US is working to establish transportation options out of the country for the estimated hundreds of thousands of Americans there, no such options are available for US citizens in Iran. The US does not have a diplomatic presence there. 'We do not anticipate offering direct US government assisted departure from Iran,' State Department spokesperson Tammy Bruce noted at a press briefing Friday. The situation report described some Americans facing difficulties leaving Iran. 'Security alerts also note Americans seeking to depart should be prepared to encounter checkpoints and questioning from authorities,' it states. 'Numerous US citizens have described delays and harassment along their exit route.' It also notes that two Americans were reportedly detained while attempting to depart the country. One source trying to get a US citizen family member out of Iran expressed frustration at the State Department earlier this week, saying the agency seemed to defer everything to seemingly overwhelmed US embassies. This person wanted to see the department apply more pressure to Iran's neighboring countries to approve Americans' entrance. They also suggested dispatching embassy officials closer to the Iranian border to help. More than 25,000 people have sought information from the State Department about the 'situation in Israel, the West Bank and Iran,' Bruce said Friday. Bruce said that the people were seeking 'general information,' and some of them might be inquiring about departure. The department has launched a 'crisis intake form' for Americans in Israel and Iran wanting to know how to get out of those countries as the conflict continues. 'Americans seeking departure should take advantage of existing means to leave,' Bruce noted at the press briefing. Meanwhile, US Ambassador to Israel Mike Huckabee said Thursday that the US is 'working to get military, commercial, charter flights & cruise ships' for evacuation from Israel. Trump on Thursday opened a two-week negotiating window before deciding whether to strike Iran, setting off an urgent effort to restart talks that had been deadlocked when Israel began its bombing campaign last week.

Axios

16 minutes ago

• Axios

Trump admin shortens ACA enrollment window

The Trump administration on Friday narrowed the period to sign up for Affordable Care Act coverage and imposed other restrictions aimed at rolling back Biden-era flexibilities for the program. Why it matters: The Centers for Medicare and Medicaid Services expects the new policies to lower marketplace premiums by about 5% on average, and save taxpayers $12 billion next year. But between 725,000 and 1.8 million people are expected to lose coverage, per CMS's projections. The big picture: Congress is considering codifying many of the same provisions in the massive GOP budget bill that's now in the Senate. That would make them much harder for a future administration to undo. State of play: CMS is shortening the period for enrolling in marketplace insurance by two weeks, starting for plan year 2027. Federal exchanges will then be open for sign-ups from Nov. 1 through Dec. 31 of each year. It's also repealing the monthly opportunity started under the Biden administration for lower-income people to get marketplace coverage. The new rule limits plans' ability to cover gender-affirming care beginning next year. It also excludes Deferred Action for Childhood Arrivals (DACA) recipients from obtaining ACA coverage. CMS said the policies will ensure federal subsidies to offset the cost of ACA coverage only support statutory goals of the law. Yes, but: In response to public comments, CMS is making several of its changes temporary. For plan year 2026 only, CMS will begin charging a $5 monthly premium for consumers who are automatically reenrolled in an ACA plan from one year to the next and would otherwise have fully subsidized coverage. Other changes concerning income verification for enrollees will also end after 2026. Between the lines: Insurance losses from the new policy will be felt hardest in states where "erroneous and improper enrollment is most noticeable," including Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas and Utah, CMS said.

Politico

22 minutes ago

• Politico

Bush 43 alum joins ‘shadow' RNC

With Daniel Lippman FIRST IN PI: Marc Racicot, the former Montana governor and RNC chair, is joining Our Republican Legacy as chair, lending his voice to the organization as it expands efforts to grow grassroots support for the pre-MAGA era of the GOP ahead of the midterms next year and presidential election in 2028. — Racicot joins former Sens. John Danforth and William Cohen, two founding chairs of the nonprofit that bills itself as the inheritor of true Republican Party values. Former Reps. Charlie Dent and Barbara Comstock are also being elevated to chairs as the organization seeks to grow its foothold in all 50 states. — 'There are a lot of good people that can come back into the fold, we just have to have the time and the messaging to work with them and show them what's going on,' Racicot told PI. — Racicot, who left public service after successfully managing President George W. Bush's 2004 reelection campaign, went on to spend four years as the president of the American Insurance Association (now known as the American Property Casualty Insurance Association). — 'We're building a 50-state national committee, basically a shadow version of the party,' Our Republican Legacy senior adviser Chris Vance told PI, while emphasizing that the organization is not a PAC and will not be endorsing specific candidates or making donations. — 'Maybe we, at some point, will form a PAC,' Vance said. 'But right now we are an advocacy group, like the NRA is an advocacy group, the Sierra Club, all these different organizations. They can't say the magic words — elect, donate, that sort of thing — but they still have a very big political impact by fighting for their ideas.' Happy first Friday of Summer and welcome to PI. This is Daniel (no, not that one) and I'm your guest host today. Send tips and recommendations on how to beat the heat this weekend to dbarnes@ or ping me on Signal. And follow me on X: @dnlbrns. Caitlin will be back on Monday. You can always reach her on Signal, email her at coprysko@ and follow her on X: @caitlinoprysko. BURR LOBBYING FOR BIOTECH: Former Sen. Richard Burr (R-N.C.) will represent the Biotechnology Innovation Organization on issues related to drug pricing and supply chains, Medicare and Medicaid and reauthorization of the Pandemic and All-Hazards Preparedness Act, POLITICO's Amanda Chu reports. Burr is currently health policy chair at DLA Piper. FRIENDS IN HIGH PLACES: Gaurav Srivastava, the Indian American businessperson who last year had major donations to Democrats frozen or returned after allegations he had posed as a spy for the CIA, now appears to be trying to curry favor with top Republicans, Daniel L. reports. — Srivastava on Thursday posted a photo he recently took with Vice President JD Vance, adding in a caption, 'Pleasure seeing Vice President @JDVance during last week's event in #WashingtonDC as we work towards strengthening America's future!' — The photo was taken at the performance of 'Les Misérables' at the Kennedy Center that President Donald Trump and Vance attended along with a slew of other senior administration and Republican figures. — 'Thousands of people were at the Kennedy Center that evening, and the Vice President took photos with many of them,' a spokesperson for Vance said in a statement to PI. A spokesperson for Srivastava did not provide a comment. Srivastava has disputed the 'fake spy' allegations in the past. — Earlier this year, Srivastava also had lunch with Hunter Biden, according to photos the Daily Mail snapped. — In 2023, the FBI reportedly began investigating Srivastava and where he got his money. Srivastava has been engaged in a long-running battle with Dutch oil trader Niels Troost after their business relationship went sour. An FBI spokesperson declined to comment on the status of the investigation. FOUL-MOUTH FAIN: 'In a scathing report from a court-appointed union watchdog, UAW President Shawn Fain is depicted as a foul-mouthed, hotheaded leader,' Liam Rappleye reports in the Detroit Free Press. — The 93-page report makes several references to 'a moment where Fain told hundreds of UAW members at a large staff meeting that he would 'slit' or 'cut' their throats if they messed with his closest aides.' — 'In another anecdote — which Fain admitted to be true — the UAW president confronted a print shop employee and launched into a 'tirade' upon hearing that [UAW Secretary-Treasurer Margaret Mock] wanted a photo of herself to appear alongside Fain on a pamphlet outlining details of an ongoing bargaining campaign.' — 'Fain reportedly confronted the Head of the Print Shop in a tirade, demanding, among other things, that she tell him, 'Who told you to put [Mock's] motherf------ photo on there? This is my motherf------ membership.'' SPOTTED at the Rainey Center's 'Tea Party Revival: Don't Tax the Light' at Butterworth's on Wednesday night: Citizen Solutions Inc.'s Tomer Kagan, National Nuclear Security Administration's Charles Moran, RNC's CJ Pearson, Log Cabin Republicans' Ed Williams, Andre Soriano, TSG Advocates' Chase Kroll, Rainey Center's Sarah Hunt, Chet Love and Connor Sandagata, Foundation for American Innovation's Zach Graves, Latinos for America First's Bianca Gracia, HHS' Gregory Angelo, Fox News' Ryan Schmelz, Treasury's Shane Shannon and Dean Ball of the White House Office of Science and Technology Policy. Jobs report — The Modular Building Institute has added Alex Carmack as government affairs director, Andrew Muchnick as government affairs manager and Chastity Meade as communications manager. Carmack joins from the United Network for Organ Sharing where he worked as a policy analyst. Muchnick was previously a senior director in Bullpen Strategy Group's media intelligence practice. Meade was a community manager and social media manager for the MIT Sloan CIO Symposium. — Mike Spratt has joined the Investment Company Institute as an associate general counsel from the SEC where he previously was assistant director in the division of investment management disclosure review. — The American Land Title Association has promoted three members of their government relations staff. Elizabeth Blosser has been appointed chief strategy, communications and innovation officer. She was previously vice president of government affairs overseeing state advocacy. Emily Tryon has been promoted to chief advocacy officer. She was previously vice president of government affairs managing federal advocacy. Kevin Cameron takes on a new title as vice president, head of federal government affairs. He was previously senior director of federal government affairs. — Gregory Cox is the new executive director of the office of government relations at Texas Christian University. He was most recently an attorney in private practice and is a Greg Abbott alum. — Brett Tolman is the new chair for law and justice at America First Policy Institute. He previously served as chair of AFPI's weaponization of government initiative. — CropLife America has added Tonya Parish as senior manager of communications and government relations. Parish was previously communications manager for the Alliance for Automotive Innovation. She is joined at CropLife by Jay Ivey, new manager of government relations. He was previously state outreach and public affairs coordinator at the U.S. Department of Agriculture. New Joint Fundraisers Blue Dog Victory Fund (Cooke for Congress, Rep. Jared Golden, Rep. Marie Gluesenkamp, Rep. Vicente Gonzalez, Rep. Lou Correa, Rep. Adam Gray, Rep. Sanford Bishop, Rep. Jim Costa, Rep. Henry Cuellar, Rep. Josh Gottheimer, Rep. Mike Thompson) New PACs American Fidelity PAC (Super PAC) BDA PAC (Hybrid PAC) Founding Father's Vision PAC (Hybrid PAC) DraftKings Inc. Political Action Committee DBA DraftKings PAC (PAC) Fire Fetterman (Super PAC) Archer Aviation Inc. Political Action Committee (AKA Archer PAC) (PAC) MAGA KY (Super PAC) Lunatic Fringe Political Action Committee (PAC) New Lobbying REGISTRATIONS Axadvocacy Government Relations: 503 Capital Partners Ballard Partners: Transportation Management Services Boundary Stone Partners: Mantel Capture, Inc Boundary Stone Partners: National Carbon Technologies, LLC Brightspring Health Services: Brightspring Health Services Continental Strategy, LLC: Cm Consortium LLC Covenant Government Affairs, LLC: Auto-Mark, Inc. Dba Sea Foam Sales Company Covenant Government Affairs, LLC: Royal Engineering And Consulting, LLC. Cruce Capitol Consulting LLC: American Sugar Cane League Of The USa, Inc. Dga Group Government Relations LLC: Kyowa Kirin Inc, USa DLA Piper LLP (US): Biotechnology Innovation Organization Ervin Graves Strategy Group, LLC: Hereford Ethanol Partners, L.P. Hogan Lovells US LLP: Artanis Capital, LLC J.A. Green And Company (Formerly LLC): Aimpoint US J.A. Green And Company (Formerly LLC): American Center For Manufacturing & Innovation Federal General LLC Javelin Advisors LLC: Fred Daibes Lilette Advisors: Rf Catalytic Capital Lilette Advisors: Vale USa LLC Mercury Public Affairs, LLC: Sentinelone Inc. Michael Best Strategies LLC: Charter Casting Michael Best Strategies LLC: Dairyland Power Cooperative Michael Best Strategies LLC: Kohlberg Kravis Roberts & Co. L.P. (Kkr) Michael Best Strategies LLC: Maxar Intelligence Michael Best Strategies LLC: Tricolor Holdings Nelson Mullins Riley & Scarborough: United Opticians Association Park Strategies, LLC: Global Dairy Distributors LLC Steptoe LLP: Lake Charles Methanol Ii, LLC The Mckeon Group, Inc.: Momentum Solutions The Mckeon Group, Inc.: Sunation Energy The Mckeon Group, Inc.: Umo & National Association Of Ukrainian Defense Industries (Naudi) The Vogel Group: Allentown, Inc The Vogel Group: Auto Approve The Vogel Group: Canadian National Railway The Vogel Group: Contingency Capital The Vogel Group: Graftech International Ltd. The Vogel Group: William Tierney Venn Strategies: Ohio Coating Company New Lobbying Terminations Accelerate Strategies: Sports And Fitness Industry Association Cgcn Group, LLC: National Oilseed Processors Association Ess Tech, Inc.: Ess Tech, Inc. Forbes-Tate: Crestview Strategies Obo Teknion Forbes-Tate: Ginkgo Bioworks Forbes-Tate: Lykos Therapeutics Lot Sixteen LLC: North Star Manganese, Inc. Ms. Virginia Ainslie: American Geophysical Union