Republicans in the House of Representatives released a new fiscal bill that will likely change before it comes to a vote. Colloquially referred to as the GOP tax bill, we've seen early reports about an increase in the SALT limit, discussion of an additional tax bracket for those earning more than $2,500,000 as well as tips and overtime being exempt from taxation.
But now that the Republicans have released a bill, we can see what the initially proposal will be. There will be more discussions about this in the coming days and weeks but it's interesting to see what's been initially floated.
Read More:
- Find out if you are ready to retire.
- Get the highest savings interest rate possible.
- Here's what you need to know before claiming Social Security benefits.
Tips & Overtime Exempt
President Trump campaigned on the idea that tips and overtime should be exempt from income tax and this bill follows through on that promise – tips and overtime pay would not be subject to income tax through 2028. This would be retroactive to the start of the year and go through Trump's term in office.
Auto Loan Interest Tax Deductible
Another campaign promise made by Trump was to make interest from automobile loans tax deductible, similar to mortgage loan interest. This would be retroactive to the start of the year and run through 2028. Auto loan interest has not been tax deductible since 1987, when most personal interest expenses were deductible (including credit card interest!). There is precedence for this though, albeit one that was removed by President Reagan.
Increase in SALT Limit
The existing SALT limit is $10,000 but the bill would increase it to $30,000 – three times the current limit. The proposal is likely to make residents of higher tax states, such as New York and California, happy but some would argue it should be even higher.
In an effort to lower the cost of this increase, there would be an income test for eligibility. It starts to phase out for individuals earning more than $200,000 and married couples earning more than $400,000.
No New Millionaire Tax
Despite Trump's suggestion that there be an additional higher tax bracket for those earning more than $2,500,000, this bill does not include such an addition. The top tax bracket remains set at 37%, established by the Tax Cut and Jobs Act of 2017 (signed by Trump). This bill had to fix the top rate to 37% or it would revert back to the 39.6% rate before the TCJA.
Carried Interest Not Changed
Carried interest, also known as carry, had gotten a lot of attention in previous years because of how it was treated in taxation. President Trump had wanted it treated like ordinary income, which would increase taxation on private equity and venture investors, but it was not affected by this bill.
Electric Vehicle Tax Credits Sunsetting
Buyers of electric vehicles will no longer get a $7,500 tax credit once 2026 ends. And for 2026, the number of manufacturers for which this credit was available was reduced. Only buyers of EV manufacturers that sold fewer than 200,000 EVs in 2025 year would be able to claim that credit. This clearly limits the number of eligible EVs in the final year of the tax credit.
Elderly Standard Deduction Bonus
For those ages 65 and older, the standard deduction will go up by $4,000 through 2028. It is retroactive to the start of this year and, unfortunately, those who itemize will get no similar benefit.
There is an income test for this though, with the additional $4,000 phasing out for individuals making more than $75,000 and married couples making more than $150,000. The standard deduction is $15,000 for individuals and $30,000 for married filing jointly, they would go up considerably with this boost.
5% Tax on Sending Money Abroad
There will be a new 5% tax on all payments sent to foreign nations, with tax credits to reimburse U.S. citizens who send payments internationally. A lot of workers will earn money in the United States and send it internationally to their friends and family, this tax would immediately tax them and only U.S. citizens could get a tax credit back.
Increased Child Tax Credit
There had been rumors of additional tax credit or bonuses for families that had children and this has materialized into an increase in the very popular Child Tax Credit. The Child Tax Credit would increase from $2,000 to $2,500 through 2028. It would return to $2,000 in 2029. The Child Tax Credit is one of the most effective ways we, as a nation, have combated child poverty.
There's more to the bill and we'll see increased debate in the coming days, it will be fascinating to see how it changes and what will finally get passed.
