The Republican-controlled House narrowly passed President Trump's comprehensive tax and spending legislation on May 22 by a razor-thin 215-214 margin, setting the stage for what could be the most significant tax overhaul since 2017. Tax practitioners should prepare for potential changes that would affect virtually every aspect of their practice, though the Senate must still act before any provisions become law.
TCJA Extension and Individual Provisions
The centerpiece of the legislation permanently extends the Tax Cuts and Jobs Act provisions scheduled to expire at year-end. Without action, income tax rates would increase for most brackets in 2026, making this extension critical for client planning. The bill also increases the child tax credit to $2,500 through 2028 before dropping to $2,000, compared to the current $1,000 baseline without extension.
A significant late-addition compromise raises the state and local tax deduction cap from $10,000 to $40,000 for taxpayers earning less than $500,000 annually. This change includes annual inflation adjustments over ten years and represents a major victory for practitioners serving clients in high-tax states like New York, California, and New Jersey.
Campaign Promise Fulfillment
The legislation delivers on several Trump campaign pledges that will require new compliance procedures. Tipped employees can claim tax deductions for tips through 2028, while overtime wages become deductible for workers. The bill also allows temporary deductions up to $10,000 for car loan interest on American-made vehicles, creating new documentation requirements for practitioners.
Seniors over 65 earning less than $75,000 individually or $150,000 jointly can claim an additional $4,000 deduction, expanding tax planning opportunities for this demographic.
New Savings Vehicle
The legislation creates "Trump Accounts" for children under eight, allowing $1,000 initial contributions and up to $5,000 annually in tax-free contributions until age 18. Funds can be used for education, home purchases, or business startup costs until age 30, when restrictions lift entirely. Practitioners will need to understand the qualification rules and distribution requirements for these accounts.
Education and Student Loan Changes
University endowment taxes increase significantly for institutions with larger endowments, particularly affecting elite schools. The bill also establishes a $5 billion annual federal school voucher program for families earning less than three times local median income.
Student loan provisions eliminate Biden-era relief regulations and consolidate repayment plans to just two programs. The legislation caps loans for parents and undergraduates while eliminating graduate student lending programs entirely.
Energy and Environmental Rollbacks
Clean energy tax credits face rapid elimination beginning 60 days after enactment, a major change from gradual phase-outs. The $7,500 electric vehicle tax credit disappears, along with various Inflation Reduction Act provisions. Several House Republicans expressed concern about the abrupt nature of these changes, suggesting potential Senate modifications.
Social Program Modifications
Medicaid faces substantial changes including work requirements for expansion adults and increased eligibility verification frequency. The Congressional Budget Office estimates 7.6 million Americans could lose coverage over ten years. SNAP benefits also implement new work requirements for ages 55-64 and limit eligibility to citizens and permanent residents.
Fiscal Impact and Timeline
The legislation adds approximately $3.8 trillion to federal debt over ten years while raising the debt ceiling by $4 trillion. At $11.6 trillion in total tax changes over nine years, it surpasses the 2017 TCJA's scope. The package now moves to the Senate, where multiple Republicans have indicated plans for modifications.
Tax practitioners should monitor Senate developments closely, as the 2017 experience showed substantial changes remain possible. The legislation's complexity and scope suggest significant compliance challenges ahead, regardless of final form. With current TCJA provisions expiring December 31, practitioners face compressed timeframes for year-end planning once the Senate acts.
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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