Congressional Republicans secured enough votes to send budget reconciliation legislation to President Trump, who signed the bill on July 4th. Following initial House passage on May 22, the Senate spent several weeks working out changes to the bill. On July 1, the U.S. Senate narrowly passed its version of the budget reconciliation legislation. After more than 24 hours of debate, the Senate voted 50-51, with Vice President Vance casting the tie-breaking vote. On July 3, the House passed the Senate’s version by a vote of 218 – 214. Under conflicting accounting methods, the bill would either add $3.4 trillion to the deficit or save about $400 billion under an alternative “current policy” model. It also increases the debt limit by $5 trillion in time to avoid default, which was slated to occur later this summer.

The bill implements key parts of President Trump’s policy agenda by permanently extending the 2017 tax cuts; boosting funds for immigration, border security, and defense; expanding oil and gas leasing; and extending key agricultural commodity support programs. These priorities were partially offset by phasing out clean energy tax credits from the Inflation Reduction Act, modifying student loan repayments, imposing new immigration fees, and making changes to the Supplemental Nutrition Assistance Program (food stamps) and Medicaid by imposing work requirements, increased cost sharing on states, local governments, and enrollees, and imposing provider tax restrictions.

The ICCFA advocated for the bill to include policies from the Funeral and Cemetery Trust Modernization Act that would have restored a deduction for investment advisory fees paid by funeral and cemetery trusts that the 2017 tax law suspended and increased the $5 per gravesite tax deduction limit. Politics surrounding the bill and its delicate balance of supporters prevented the inclusion of the provisions. ICCFA will continue to fight for these items as future tax legislation develops. Congressional leaders have indicated that additional budget reconciliation legislation may be forthcoming.

The One, Big Beautiful Bill Act includes the following measures:

  • Marginal Tax Rates: permanently extend the 2017 law’s lower rates for individuals and trusts beginning in 2026;
  • Estate and Gift Tax: permanently extends the exemption for the estate and gift tax; increases the limits to $15 million, from $10 million, for individual filers starting in tax year 2026. The exemption would be indexed to inflation;
  • Business Pass-Through: permanently extends the 20 percent pass-through deduction for business income;
  • Charitable Contributions: creates a permanent deduction of up to $1,000 in qualified charitable contributions for individual filers who don’t itemize deductions;
  • Corporate Charitable Donations: allows corporate taxpayers to deduct charitable contributions between 1% to 10% of taxable income. The measure would allow contributions beyond the cap to be carried forward for as long as five tax years;
  • Paid Family Leave: permanently extends the paid family leave credit that allows employers to claim nonrefundable credits ranging from 12.5% to 25% of the wages paid to workers on paid leave;
  • Business Interest: permanently reinstates the EBITDA limitation for calculating the business interest deduction after December 31, 2024;
  • Overtime Compensation: establishes a deduction for overtime compensation for tax years 2025 through 2028, capped at $12,500 for individual ($25,000 for joint) filers and phased out for income that exceeds $150,000 for individual ($300,000 for joint) filers;
  • Senior Tax Credit: establishes a tax credit for seniors ages 65 and older to deduct an additional $6,000 from their taxable income for tax years 2025 through 2028 that phases out at a 6% rate for individual filers whose income is more than $75,000 or joint filers whose income exceeds $150,000 (in place of campaign pledge to abolish tax on social security);
  • Employer-Provided Childcare: permanently raises the maximum amount of the nonrefundable credit that businesses can claim for child care services to employees to $500,000, from $150,000; increases the share of child care expenses that can be claimed to 40%, from 25%. Payments to third-party childcare services would be treated as qualifying childcare spending; and
  • Scholarship Granting Organizations: creates a new tax credit for an individual’s charitable donations to qualifying tax-exempt organizations that provide scholarships to elementary and secondary school students to cover tuition, fees, tutoring, books, supplies, uniforms, and computers at public, private, or religious schools.