Major Tax Reform Ahead: What the 2025 House Tax Bill Means for You and Your Business
- Baker Holtz
- Jun 11
- 3 min read
In May 2025, the U.S. House of Representatives passed a major budget reconciliation bill that includes sweeping changes to the tax code and federal spending. This legislation is the latest effort to revise key elements of the 2017 Tax Cuts and Jobs Act (TCJA) before many of its provisions expire at the end of 2025.
While updates to the SALT (State and Local Tax) deduction cap have received significant attention, the bill is far more expansive- covering everything from individual tax brackets to business incentives and spending reductions. Here's what individuals and business owners should know as the bill heads to the Senate and beyond.
At a Glance: What’s In the Bill?
Tax Changes for Individuals
Expanded SALT Deduction: The cap on the state and local tax deduction would increase from $10,000 to $40,000 per household (or $20,000 for married filing separately), with phase-outs starting at $500,000 of income.
Increased Estate and Gift Tax Exemption: Beginning in 2026, the federal estate and gift tax exemption would be permanently raised to $15 million per individual (or $30 million for married couples), with annual adjustments for inflation. This would lock in a historically high exemption amount, offering extended planning flexibility for high-net-worth individuals.
Tax-Free Tip Income: A new proposal would exempt tip income from federal income taxes, aiming to provide targeted relief for service industry workers. This would not apply to employer-paid wages, only to voluntary gratuities.
Tax Provisions for Businesses
100% Bonus Depreciation Restored: Businesses could immediately write off the full cost of qualifying capital assets purchased through 2026, encouraging investment and improving cash flow.
Immediate R&D Expensing: Domestic research and development costs would again be fully deductible through 2026, offering relief to innovation-driven industries.
Expanded Section 179 Expensing: The cap for Section 179 expensing would increase from $1.25 million to $2.5 million, allowing businesses to immediately deduct more of the cost of qualifying equipment and machinery. The proposal also raises phase-out thresholds, extending the benefit to larger investments.
Why this Bill Matters
This particular bill is so heavily scrutinized due to its strong cause and effect for many tax-paying individuals and business owners.
For individuals, the proposed legislation offers a greater opportunity to itemize deductions and reduce taxable income, particularly through the expanded SALT deduction. This change is especially beneficial for taxpayers in high-tax states. By raising the deduction cap and addressing the marriage penalty, the bill also has the potential to increase disposable income and promote greater tax equity among joint filers.
For businesses, the enhanced deductions—including restored bonus depreciation and immediate expensing of domestic R&D costs—could lead to significant year-over-year tax savings. These provisions are designed to encourage investment in capital assets and innovation, while also providing a more stable planning environment.
Why Happens Next?
The bill now moves to the Senate, where revisions are likely. Key provisions may be adjusted or delayed, and full passage is not guaranteed. However, the momentum around extending or modifying expiring TCJA provisions makes it increasingly likely that some version of these reforms will be enacted before 2026.
Key Considerations
As tax policy evolves, it’s critical to:
Monitor legislative updates
Consult with your CPA or financial advisor
Consider adjustments to your 2025 and 2026 tax planning strategy
Baker Holtz is well versed in the navigation of tax policy and planning. Check out our Baker Holtz Blog for more tax tips and policies for your financial future.
Please reach out to us with any questions and we would be happy to personally assist you.
Baker Holtz CPAs and Advisors
161 Ottawa Ave NW Suite 200
Grand Rapids, MI 49503
Phone: 616-458-1835
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