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CNBC
3 days ago
- Business
- CNBC
How child tax credit would change under Senate, House GOP's 'big beautiful' spending bills
As Senate Republicans race to pass President Donald Trump's "big beautiful" spending bill, key provisions, including the child tax credit, could change amid Senate-House negotiations. The Tax Cuts and Jobs Act, or TCJA, of 2017, temporarily boosted the maximum child tax credit to $2,000 from $1,000, which will expire after 2025 without action from Congress. If enacted, the Senate bill would permanently increase the biggest credit to $2,200 starting in 2025, according to a draft of the text released on Monday. The measure would also index this figure for inflation after 2025. By comparison, the House-approved bill would boost the top child tax credit to $2,500 from 2025 through 2028. After that, the credit's highest value would drop to $2,000 and be indexed for inflation. More from Personal Finance:'SALT' deduction in limbo as Senate Republicans unveil tax planWhat the Fed's upcoming decision on interest rates could mean for your moneySenate GOP plan may trigger 'avalanche of student loan defaults,' expert says It's unclear how the final provision may change before Trump signs the package into law. However, in either version, the changes wouldn't benefit the lowest-earning families, some policy experts say. "It's extremely disappointing," said Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities' federal fiscal policy division. "The [child tax credit] increase will go to families with middle and upper incomes." Here's how the tax break works and who could benefit if Congress enacts the updates. For 2025, the tax break is worth up to $2,000 per qualifying child under age 17 with a valid Social Security number. Up to $1,700 is "refundable" for 2025, which provides a maximum of $1,700 once the credit exceeds taxes owed. "If you have very low income, you can't access the full $2,000 credit," and the tax break phases out for "very high-income families," said Elaine Maag, senior fellow in the Urban-Brookings Tax Policy Center. After your first $2,500 of earnings, the child tax credit value is 15% of adjusted gross income, or AGI, until the tax break reaches that peak of $2,000 per child. The tax break starts to phase out once AGI exceeds $400,000 for married couples filing together or $200,000 for all other taxpayers. Under current law, 17 million children don't receive the full child tax credit, according to Cox from the Center on Budget and Policy Priorities. The reason is many families earn too little and they don't owe taxes. The Senate and House proposals don't change that "central problem," she said. In 2024, the House passed a bipartisan bill to address this issue by boosting the refundable portion of the credit, but the legislation later failed in the Senate. The proposed higher child tax credit comes as the U.S. fertility rate hovers near historic lows, which has troubled lawmakers, including the Trump administration. Some research suggests financial incentives, like a bigger child tax credit, could boost U.S. fertility. But other experts say it won't solve the issue long-term.
Forbes
3 days ago
- Business
- Forbes
Senate Vs. House Tax Bills: Key Differences Impacting Estate Planning In 2025
Senate vs. House Tax Bills: Key Differences Impacting Estate Planning in 2025 As Congress debates the 'Big Beautiful Bill' – the next round of significant tax legislation, estate planners and their clients are paying close attention. The Senate Finance Committee and the House have each advanced their versions of the 2025 tax bill, both aiming to make permanent many provisions from the 2017 Tax Cuts and Jobs Act (TCJA). However, important differences could significantly impact estate and tax planning for high-net-worth families. Core Differences: Estate and Gift Tax Exemption Both the House and Senate bills propose making the TCJA's estate and gift tax exemption permanent, rather than reverting to the 2017 law on January 1, 2026 . The House version sets the exemption at $15 million per individual (indexed for inflation after 2025), up from the current $13.99 million. The Senate version closely aligns with this, though the specifics of inflation adjustments may vary. Both bills retain the 40% tax rate on estates above the exemption. For those with substantial estates, this is good news. The possibility of the exemption reverting to pre-TCJA levels in 2026 has prompted a surge in lifetime gifting and trust planning. If either bill passes, the urgency for immediate action may lessen, but the opportunity to remove future appreciation from one's taxable estate remains compelling. SALT Deduction: A Major Divergence One of the most significant differences for high-net-worth taxpayers is the treatment of the state and local tax (SALT) deduction. The House bill proposes raising the SALT cap to $40,000 per year for taxpayers with adjusted gross income (AGI) under $500,000, providing substantial relief to residents of high-tax states. In contrast, the Senate bill retains the current $10,000 cap, although this could change as negotiations continue. For clients in Massachusetts and other high-tax areas, the House version offers a clear advantage. Greater deductibility of state and local taxes would improve after-tax cash flow and could influence decisions about property ownership and residency. Business and Individual Tax Provisions The two bills also differ in their treatment of business taxes. The House bill extends certain deductions, such as those for research and development, on a temporary basis, while the Senate would make these extensions permanent. For business owners and family offices, the Senate's approach offers more predictability. On the individual side, the House increases the standard deduction and child tax credit and introduces 'Tax-Advantaged Savings Accounts' for newborns with government contributions and tax-advantaged growth. The Senate bill offers a larger deduction for seniors and a pared-back child tax credit, along with permanent extensions of the Trump-era tax cuts. International Taxation and Debt Limit The Senate bill proposes more extensive changes to international tax provisions, including rules around global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), and the base erosion and anti-abuse tax (BEAT), as defined under the Internal Revenue Code. It also includes a higher debt limit increase than the House bill, which may affect future fiscal policy. Estate Planning Strategies: Next Steps For estate planners and their clients, the prospect of a higher, permanent exemption is reassuring but not a reason for complacency. Here's what you should consider: Tax laws are subject to frequent changes and modifications. Proactive, flexible planning remains the best defense against evolving legislation. Top Ten Keywords:
Entrepreneur
3 days ago
- Business
- Entrepreneur
Why New Tax Rules Could Be a Game Changer for Your Business
With the One Big Beautiful Bill Act making its way through Congress, entrepreneurs need to be ready for significant tax policy changes. Opinions expressed by Entrepreneur contributors are their own. No entrepreneur wants a surprise tax bill — especially when every dollar matters for growth. Staying ahead of tax policy changes is one of the smartest ways to protect your bottom line and avoid disruptions. With the Senate now reviewing the One Big Beautiful Bill Act, Congress is moving closer to enacting one of the most significant shifts in U.S. tax policy in recent history. If passed, the legislation would expand — and in many cases, strengthen — existing incentives for entrepreneurs to reinvest in equipment, hire more staff, and scale with confidence. Here's what's coming — and how you can position your business for what's next. Related: 4 Tax Strategies Every High-Earning Entrepreneur Needs to Know for 2025 The government wants you to invest in your business — now more than ever The 2017 Tax Cuts and Jobs Act (TCJA) brought sweeping changes to the tax code, many of which aimed to boost business investment. But those provisions were set to expire by the end of this year. The new House bill extends and enhances several of those benefits. One major update? The Qualified Business Income (QBI) deduction gives many sole proprietors, partnerships, S corporations, and some trusts and estates a tax break. Under the TCJA, that deduction was 20%. The new legislation would increase it to 23% and make it permanent, putting more cash directly into the hands of small business owners. Another key change: entrepreneurs could again deduct domestic R&D expenses immediately, restoring a popular provision that had expired. While this update would only run from 2025 through 2029, it marks a meaningful shift. Countries like South Africa and Singapore already offer enhanced R&D deductions of 150% to 400% — this change helps U.S. businesses stay globally competitive. The bill also brings back full bonus depreciation, allowing businesses to deduct 100% of qualifying assets like equipment, software, and property at the time of purchase. That means you won't need to spread deductions out over time — you get the full benefit upfront. The government is shifting what it wants you to invest in Governments shape economic behavior through tax policy. In recent years, U.S. incentives have focused heavily on renewable energy and emissions reduction. Business owners have used tax credits to install solar panels or invest in electric vehicles at lower costs. But the One Big Beautiful Bill Act, backed by the Trump administration and a Republican-led Congress, signals a pivot. Incentives are shifting toward American manufacturing and domestic fossil fuel production. That means it's time to reexamine your tax strategy. If you've invested in green initiatives — or plan to — you'll want to understand how these new priorities could affect your bottom line. For example, while EV tax breaks may fade, the bill introduces a new $10,000 deduction on loans for vehicles assembled in the U.S. Make sure your strategy aligns with these evolving incentives. Personal tax changes will impact you and your employees The bill also raises the standard deduction to $16,000 for individual filers and $32,000 for joint filers — up by $1,000 and $2,000, respectively. That's welcome news for many employees and for entrepreneurs who don't itemize. Seniors get an even better break. The legislation includes a temporary $4,000 bonus deduction for individuals over 65 with a modified AGI under $75,000 (or $150,000 for joint filers). However, that bonus expires in 2028. If you live in a high-tax state, you'll want to note the changes to the SALT deduction (state and local tax). The current $10,000 cap would jump to $40,000 in 2025 for households earning under $500,000 and gradually increase through 2033. Above that threshold, the deduction phases out entirely. There are also proposed exemptions for tips and overtime pay, which could change how you approach payroll and compensation. These details are worth discussing with a tax advisor to ensure you're optimizing for both compliance and competitive hiring. Related: 4 Tax Tips That Will Give Your Business an Edge and Save You Money in 2025 Thinking of starting a business? Now may be the best time The U.S. has a long tradition of using tax policy to support entrepreneurship, and this bill continues that legacy. If you've been sitting on a business idea, the new provisions could help you get started with lower upfront costs and stronger long-term incentives. At the end of the day, every dollar saved on taxes is a dollar you can reinvest — whether in talent, technology, or new offerings. Smart planning now will ensure your business is ready for what's ahead.
NBC News
4 days ago
- Business
- NBC News
'SALT' deduction in limbo as Senate Republicans unveil tax plan for Trump's spending package
As Senate Republicans release key details of President Donald Trump 's spending package, some provisions, including the federal deduction for state and local taxes, known as SALT, remain in limbo. Enacted via the Tax Cuts and Jobs Act, or TCJA, of 2017, there's currently a $10,000 limit on the SALT deduction through 2025. Before 2018, the tax break — including state and local income and property taxes — was unlimited for filers who itemized deductions. But the so-called alternative minimum tax reduced the benefit for some higher earners. The Senate Finance Committee's proposed text released on Monday includes a $10,000 SALT deduction cap, which is expected to change during Senate-House negotiations on the spending package. That limit is down from the $40,000 cap approved by House Republicans in May. The SALT deduction has been 'contentious' 'SALT has been contentious for eight years,' said Andrew Lautz, associate director for the Bipartisan Policy Center's economic policy program. Since 2017, the SALT deduction cap has been a key issue for certain lawmakers in high-tax states like New York, New Jersey and California. These House members have leverage during negotiations amid a slim House Republican majority. Under current law, filers who itemize tax breaks can't claim more than $10,000 for the SALT deduction, including married couples filing jointly, which is considered a 'marriage penalty.' However, raising the SALT deduction cap has been controversial. If enacted, benefits would primarily flow to higher-income households, according to a May analysis from the Committee for a Responsible Federal Budget. Currently, the vast majority of filers — roughly 90%, according to the latest IRS data — use the standard deduction and don't benefit from itemized tax breaks. Plus, the 2017 SALT cap was enacted to help pay for other TCJA tax breaks, and some lawmakers support the lower limit for funding purposes. In the Senate, 'there isn't a high level of interest in doing anything on SALT,' Senate Majority Leader John Thune said June 15 on ' Fox News Sunday.' 'I think at the end of the day, we'll find a landing spot, hopefully that will get the votes that we need in the House, a compromise position on the SALT issue,' he said. But some House Republicans have already pushed back on the proposed $10,000 SALT deduction cap included in the Senate draft. Rep. Mike Lawler, R-N.Y., on Monday described the Senate proposed $10,000 SALT deduction limit as 'DEAD ON ARRIVAL' in an X post. Meanwhile, Rep. Nicole Malliotakis, R-N.Y., on Monday also posted about the $10,000 cap on X. She said the lower limit was 'not only insulting but a slap in the face to the Republican districts that delivered our majority and trifecta.'
CNBC
4 days ago
- Business
- CNBC
'SALT' deduction in limbo as Senate Republicans unveil tax plan for Trump's spending package
As Senate Republicans release key details of President Donald Trump's spending package, some provisions, including the federal deduction for state and local taxes, known as SALT, remain in limbo. Enacted via the Tax Cuts and Jobs Act, or TCJA, of 2017, there's currently a $10,000 limit on the SALT deduction through 2025. Before 2018, the tax break — including state and local income and property taxes — was unlimited for filers who itemized deductions. But the so-called alternative minimum tax reduced the benefit for some higher earners. The Senate Finance Committee's proposed text released on Monday includes a $10,000 SALT deduction cap, which is expected to change during Senate-House negotiations on the spending package. That limit is down from the $40,000 cap approved by House Republicans in May. More from Personal Finance:Fed is likely to hold rates steady this week. What it means for youHow to protect assets amid immigration raids, deportation worriesIRS: Make your second-quarter estimated tax payment by June 16 "SALT has been contentious for eight years," said Andrew Lautz, associate director for the Bipartisan Policy Center's economic policy program. Since 2017, the SALT deduction cap has been a key issue for certain lawmakers in high-tax states like New York, New Jersey and California. These House members have leverage during negotiations amid a slim House Republican majority. Under current law, filers who itemize tax breaks can't claim more than $10,000 for the SALT deduction, including married couples filing jointly, which is considered a "marriage penalty." However, raising the SALT deduction cap has been controversial. If enacted, benefits would primarily flow to higher-income households, according to a May analysis from the Committee for a Responsible Federal Budget. Currently, the vast majority of filers — roughly 90%, according to the latest IRS data — use the standard deduction and don't benefit from itemized tax breaks. Plus, the 2017 SALT cap was enacted to help pay for other TCJA tax breaks, and some lawmakers support the lower limit for funding purposes. In the Senate, "there isn't a high level of interest in doing anything on SALT," Senate Majority Leader John Thune said June 15 on "Fox News Sunday." "I think at the end of the day, we'll find a landing spot, hopefully that will get the votes that we need in the House, a compromise position on the SALT issue," he said. But some House Republicans have already pushed back on the proposed $10,000 SALT deduction cap included in the Senate draft. Rep. Mike Lawler, R-N.Y., on Monday described the Senate proposed $10,000 SALT deduction limit as "DEAD ON ARRIVAL" in an X post. Meanwhile, Rep. Nicole Malliotakis, R-N.Y., on Monday also posted about the $10,000 cap on X. She said the lower limit was "not only insulting but a slap in the face to the Republican districts that delivered our majority and trifecta."
