Major Provisions and Effective Dates

We model the economic, revenue, and distributional effects of the following major provisions, effective after the end of 2025 unless other dates are specified:

Individual Tax Provisions

• Make the expiring tax rate and bracket changes permanent and increase the inflation adjustment by an extra year for 10 percent, 12 percent, and 22 percent brackets. Make the standard deduction increase permanence with an enhancement, starting in 2025 at $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers, inflation adjusted thereafter.
• Make the personal exemption elimination
• Temporarily add a senior deduction of $6,000 for each qualifying individual for both itemizers and non-itemizers that phases out when modified adjusted gross income exceeds $75,000 for single filers and $150,000 for joint filers, available from 2025 through 2028.
• Make the expiring child tax credit permanent with an increased maximum of $2,200 in 2026, inflation adjusted thereafter.
• Make the $750,000 principal limit for the home mortgage interest deduction
• Temporarily increase the cap on the itemized deduction for state and local taxes (SALT) to $40,000 for 2025 and increase the cap by 1 percent from that level through 2029, subject to a phaseout for taxpayers with incomes above $500,000, then reduce the cap to a flat $10,000 thereafter.
• Make other changes and limitations to itemized deduction permanent, including the limitation on personal casualty losses, termination of the miscellaneous itemized deduction (except for educator expenses), Pease limitation on itemized deductions, and certain moving expenses (except for active-duty members of the armed forces and members of the intelligence community).
• Expand the child and dependent care credit for working parents. The OBBB allows 50% of qualifying dependent care costs to be credited (compared to 35% pre-OBBB). The OBBB expands the phaseout limitations to allow more taxpayers to claim the credit. Specifically, the new phaseout limitations reduce the applicable credit percentage (but not below 35%) for taxpayers with AGI exceeding $15,000 and further reduces the credit percentage (but not below 20%) for taxpayers with AGI above $75,000 ($150,000 for joint returns).
• Limit the value of itemized deductions to 35 cents on the dollar for taxpayers in the top tax
• Make the increase in the alternative minimum tax (AMT) exemption permanent; revert AMT exemption phaseout thresholds to 2018 levels of $500,000 for single filers and $1 million for joint returns, indexed for inflation thereafter; increase the phaseout rate.
• Create a 5 percent floor on itemized deductions for charitable contributions.
• Create a permanent $1,000 above-the-line deduction for charitable contributions ($2,000 for joint filers).
• Repeal several Inflation Reduction Act green energy tax credits primarily aimed at individuals, such as electric vehicle and residential energy efficiency credits, either after 2025 or within a year of the law’s enactment.
• Temporarily make up to $25,000 of tip income deductible for individuals in traditionally and customarily tipped industries for tax years 2025 through 2028; deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).
• Temporarily make up to $12,500 ($25,000 for joint filers) of the premium portion of overtime compensation deductible for itemizers and non-itemizers for tax years 2025 through 2028; the deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).
• Temporarily make auto loan interest deductible for itemizers and non-itemizers for new autos with final assembly in the United States for tax years 2025 through 2028; deduction limited to $10,000 and phases out at a 20 percent rate when income exceeds $100,000 for single filers and $200,000 for joint filers.

Estate Tax Provisions

• Permanently increase the estate and lifetime gift tax exemption to an inflation-indexed $15 million for single filers and $30 million for joint filers beginning in 2026.

Business Tax Provisions

• Permanently restore immediate expensing for domestic research and development (R&D) expenses; small businesses with gross receipts of $31 million or less can retroactively expense R&D back to after 12/31/21; all other domestic R&D between 12/21/21 and 1/1/25 can accelerate remaining deductions over a one- or two-year period.
• Permanently reinstate the EBITDA-based limitation on business net interest
• Permanently restore 100 percent bonus depreciation for short-lived
• Temporarily provide 100 percent expensing of qualifying structures, with the beginning of construction occurring after 19, 2025, and before Jan. 1, 2029, and placed in service before Jan. 1, 2031.
• Make the Section 199A pass-through deduction permanent; increase phase-in range of limitation by $50,000 for non-joint returns and $100,000 for joint returns; create a minimum deduction of $400 for taxpayers with $1,000 or more of qualified business income (QBI) for material participants.
• Implement a 1 percent floor on deduction of charitable contributions made by
• Eliminate clean electricity production credit (45Y) and investment credit (48E) for projects placed in service after 2027, except for projects that begin construction within 12 months of passage and baseload power sources such as nuclear, hydropower, geothermal, and battery storage; introduce restrictions related to foreign entities of concern (FEOC).
• Extend the clean fuel production credit (45Z) until 2030 and expand
• Introduce FEOC restrictions for several other credits, including the nuclear production credit (45U), the clean fuel production credit (45Z), the carbon oxide sequestration credit (45Q), and the advanced manufacturing production credit (45X); alter phaseouts and eligibility for 45X and
• Require intangible drilling and development costs to be taken into account for the purposes of computing adjusted financial statement income.
• Add income from hydrogen storage, carbon capture, advanced nuclear, hydropower, and geothermal energy to qualifying income of certain publicly traded partnerships treated as corporations.