House Releases New Proposed Tax Legislation

The House Ways and Means Committee released proposed tax legislation on May 12, 2025, that extends some expiring provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) and introduces new law. Both the House and Senate (under the Senate’s budget reconciliation process) will debate this proposed legislation and there will likely be further modifications before this legislation is signed into law.

Below is a summary of some of the key provisions.

Business Considerations

• Full Expensing. 100% bonus depreciation is again allowed, under the proposed legislation, for qualified assets placed into service after January 19, 2025. This bonus depreciation would be in effect through the 2029 tax year.
• Business Interest Expense Limitation. Business interest expense is limited under the TCJA to 30% of the so called Adjusted Taxable Income (ATI). ATI was defined to roughly equal earnings before interest, taxes, depreciation, and amortization (EBITDA) up until the 2021 tax year, with ATI equal to EBIT after. The proposed legislation would again define ATI to equal EBITDA for tax years beginning after December 31, 2024, and before January 1, 2030.
• Section 174 R&D Expensing. Under the proposed legislation, domestic specified research or experimental expenditures can again be immediately expensed for tax years beginning after December 31, 2024, and before January 1, 2030.
• QBI Permanency. The qualified business income (QBI) deduction for pass-through businesses (partnerships, S corporations, and sole proprietors) would be made permanent and increased to 23%. Further, certain phase-in limitations would be introduced related to wages paid and depreciable property.

Individual Considerations

• Rate Extensions. This proposed legislation makes the TCJA’s tax rates permanent and adjusts the bracket thresholds for inflation.

For example, a married filing joint couple would pay tax at the 37% rate once taxable income exceeds $767,150 for the 2026 tax year.

• Modification of SALT Deduction. A $10,000 limitation for state and local taxes (SALT) was instated by the TCJA. And in response, many states enacted “work arounds” to this limit, including the so called passthrough entity tax (PTET) regime. The proposed legislation raises the SALT deduction limit to $15,000 for single filers and $30,000 for married filing joint filers for so called “specified taxes”, subject to taxable income phaseouts beginning at $400,000 for married filing joint filers and $200,000 for single filers. Even after the phase outs, a taxpayer is still entitled to a deduction of up to $10,000. Importantly, the term “specified taxes” is defined to include PTET payments, meaning these payments may not provide a full deduction for higher income taxpayers.
• No Tax on Tips. Taxpayers are entitled to a deduction for “qualified tips” earned by individuals working in specific industries with income below certain amounts. This proposal sunsets after the 2028 tax year.

Estate and Gift

• Exemption Amount. The proposed legislation permanently increases the unified estate and gift tax exemption to an inflation-indexed $15 million ($30 million for a married couple using portability), an increase from the present amount of $7.14 million.

Other provisions in the New Tax Legislation

• Opportunity Zones. There are a number of proposed changes to the Opportunity Zone tax incentives program, including extending the recognition date for deferred gains from 2026 to 2028 and the designation of new opportunity zones. The proposed legislation also introduces a new information reporting regime for both qualified opportunity funds and qualified opportunity zone businesses.
• Termination of Certain IRA Credits. Certain tax credits created as part of the Inflation Reduction Act of 2022 (IRA) would be eliminated at the end of the 2025 tax year, including tax credits for new and used clean vehicles.

What is not included?

There is no change to the treatment of carried interest or to the current 21% corporate tax rate. There is also no change to the capital gains tax rate or to the tax rate for high income taxpayers.

What is Next?

The House has publicly stated it hopes to approve this legislation by Memorial Day, but given slim majorities, ultimate approval may happen later in the summer. And then the Senate will consider the legislation, and this could entail further modifications and changes.

Our team of professionals is here to help you make sense of this evolving tax legislation.