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The Senate has proposed changes to the House tax bill that was passed in May. Known as the “One Big Beautiful Bill Act,” the Trump-backed plan would make the current income tax brackets permanent and introduce new tax breaks for individuals and families. Both Senate and House bills include deductions for tips and overtime pay, and an expanded standard deduction for seniors. The House raised the cap on the state and local tax (SALT) deduction, while the Senate lowered it. Analysts estimate that the legislation could increase the federal deficit, which prompted Senate revisions to address fiscal concerns and align with broader Republican policy goals.
Do you have questions about how these changes could affect your taxes? Speak with a financial advisor today.
Key Takeaways
- Trump’s new tax plan would make the 2017 Tax Cuts and Jobs Act (TCJA) brackets permanent.
- Both Senate and House bills include new tax breaks, such as deductions for tips, overtime and higher standard deductions for seniors.
- Without Senate approval, tax brackets are scheduled to revert to pre-2018 rates in 2026.
- The Senate proposal lowers the SALT deduction cap back to $10,000, while the House had increased it to $40,000. Both chambers enhance the Child Tax Credit through 2028.
- Analysts project that the House-approved plan will add between $2.4 and $2.8 trillion to the federal deficit.
How Does Trump’s Tax Plan Affect Your Tax Bracket?
The Senate Finance Committee released a revised version of the Trump-backed House bill on June 16, using the budget reconciliation process. This will allow the chamber to pass certain tax, spending and debt legislation with a simple majority and limited debate.
Both the House and Senate bills make the existing marginal tax rates permanent. The current tax brackets, which were created through the Tax Cuts and Jobs Act (TCJA) of 2017, are set to expire at the end of 2025.
Want to see how Trump’s tax plan could impact you? Read our full overview here.
If Congress doesn’t pass Trump’s bill or a new version of it, the current tax brackets would sunset and the previous rates would return, including a top marginal rate of 39.6%.
What Are the Current U.S. Tax Brackets?
There are currently seven marginal tax rates in place, ranging from 10% to 37%. Marginal tax rates apply only to the portion of your income that falls within each tax bracket, not to your total income. To determine your marginal tax rate, find the highest tax bracket that includes part of your taxable income.
Here’s a breakdown of the brackets in 2025:
2025 Federal Income Tax Brackets
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 10% | $0 – $11,925 | $0 – $23,850 | $0 – $11,925 | $0 – $17,000 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 | $11,925 – $48,475 | $17,000 – $64,850 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 | $48,475 – $103,350 | $64,850 – $103,350 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 | $103,350 – $197,300 | $103,350 – $197,300 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 | $197,300 – $250,525 | $197,300 – $250,525 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 | $250,525 – $626,350 | $250,525 – $626,350 |
| 37% | $626,350+ | $626,350+ | $578,125+ | $626,350+ |
The dollar ranges for each federal income tax bracket are adjusted annually for inflation. The IRS updates these thresholds each year based on changes in the Chained Consumer Price Index, so the income ranges typically increase slightly to reflect cost-of-living adjustments.
For example, someone who earned $102,000 in 2024 would have been in the 24% tax bracket. However, thanks to the annual inflation adjustment, the same $102,000 salary in 2025 puts them in the 22% tax bracket, which tops out at $103,350 for single filers.
What Happens if the Current Tax Brackets Expire?
If Republicans cannot advance Trump’s tax plan beyond the House, the current tax brackets would expire and revert to their pre-2018 levels when the marginal tax rates were: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
Keep in mind that the income ranges for each tax bracket wouldn’t revert to 2017 levels—only the rates. To illustrate how the tax brackets could potentially change if the TCJA sunsets, the Tax Foundation estimated the income ranges for each marginal rate in 2026 (adjusted for inflation).
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 10% | $0 – $12,200 | $0 – $24,400 | $0 – $17,450 |
| 15% | $12,200 – $49,600 | $24,400 – $99,200 | $17,450 – $66,400 |
| 25% | $49,600 – $120,100 | $99,200 – $200,100 | $66,400 – $171,500 |
| 28% | $120,100 – $250,450 | $200,100 – $304,950 | $171,500 – $277,700 |
| 33% | $250,450 – $544,550 | $304,950 – $544,550 | $277,700 – $544,550 |
| 35% | $544,550 – $546,750 | $544,550 – $615,100 | $544,550 – $580,950 |
| 39.6% | $546,750+ | $615,100+ | $580,950+ |
If the TCJA provisions expire, many taxpayers could face higher marginal tax rates. For example, a single filer earning $50,000 in taxable income in 2025 would fall into the 22% marginal tax bracket. However, under the pre-TCJA rates projected for 2026, that same income would place them in the 25% bracket. Similarly, a married couple filing jointly with $120,000 in taxable income would move from the 22% bracket to the 25% bracket if the TCJA expires.
What Else Does the Trump Tax Plan Do?
Beyond adjusting income tax brackets, Trump’s plan introduces several provisions aimed at modifying deductions and credits. Here’s an overview of key components:
Increased SALT Deduction
Under the 2017 Trump tax law, the SALT deduction was capped at $10,000 ($5,000 for married filing separately), limiting the amount taxpayers could deduct for state and local income, property, or sales taxes. Before this law, itemizing taxpayers could fully deduct these taxes, which especially benefited residents in high-tax states.
Big changes to the SALT deduction are on the table — see what they could mean for you.
The House version of the 2025 Trump tax bill proposed raising the SALT cap to $40,000 ($20,000 for separate filers) with the change applying only for 2025. The higher deduction would begin to phase down for incomes above $500,000 ($250,000 if married filing separately), but not fall below the current $10,000 / $5,000 minimum.
On June 16, the Senate Finance Committee released its version of the bill, which drops the expanded SALT deduction and keeps the cap at $10,000. This means the House and Senate proposals now differ, and the final version will depend on how lawmakers resolve those differences.
Raising the Standard Deduction
Both the House and Senate bills extend the enhanced standard deduction introduced by the TCJA and add a temporary increase for tax years 2025 through 2028.
During this period, the standard deduction would rise by $2,000 for married couples filing jointly and by $1,000 for single filers and married individuals filing separately. For heads of household, the increase would be $1,500.
Not sure if you should itemize or take the standard deduction? Find out which option could save you more.
Deductions for Tips and Overtime
The new Senate bill keeps House exemptions for tips and overtime. Proposed legislation allows taxpayers to deduct both tips and overtime pay from federal taxable income. Tips must be cash-based, voluntarily paid and earned in occupations where tipping was customary before 2025. The deduction excludes tips received in specified service trades or by high-income earners.
For overtime, the deduction applies to pay above the regular rate as defined by the Fair Labor Standards Act. Highly compensated employees are excluded. Both deductions would be available to non-itemizers and require valid Social Security numbers.
Child Tax Credit
Republicans are proposing updates to the Child Tax Credit as part of the 2025 tax plan. The House bill would increase the credit to $2,500 per qualifying child for tax years 2025 through 2028, then return it to $2,000 with inflation indexing.
The Senate bill, however, sets the credit at $2,200 for 2025 and 2026, with indexing starting in 2027.
Both bills require valid Social Security numbers for the taxpayer, child and spouse if filing jointly.
Enhanced Deduction for Seniors
The Trump tax plan also introduces a “bonus additional amount” that increases the standard deduction for seniors by $4,000 from 2025 through 2028. This enhanced deduction phases out for individuals with modified adjusted gross income (MAGI) above $75,000 ($150,000 for joint filers), reduced by 4% of the excess income. The House bill made the additional deduction available to both itemizers and non-itemizers, ensuring that seniors benefit regardless of how they file.
The Senate bill, by comparison, raises the senior deduction to a $6,000 standard deduction for each taxpayer or spouse age 65 or older starting in 2025, with that amount reduced by 6% of modified adjusted gross income over $75,000 ($150,000 for joint filers).
Both bills require a valid Social Security number to claim the deduction.
Impact of Trump Tax Plan
While the Trump administration projects significant economic growth, many economists and fiscal analysts are expressing concerns about its long-term fiscal implications.
Nonpartisan estimates suggested that the House bill would add trillions to the national debt over the next decade. For example, the nonpartisan Congressional Budget Office (CBO) projected that the House-passed version of the bill would add $2.4 trillion to the country’s deficit between 2025 and 2034. Surging debt has already contributed to a downgrade of the U.S. credit rating by Moody’s, reflecting concerns over fiscal sustainability.
Meanwhile, the nonpartisan Penn Wharton Budget Model estimates the plan will add $2.8 trillion to the deficit in the next 10 years.
Who Benefits the Most?
The benefits of the tax cuts are expected to be unevenly distributed. High-income earners and corporations are likely to see the most significant gains, while middle-income workers may experience modest relief.
The Penn Wharton Budget Model, a nonpartisan research initiative that analyzes the impact of fiscal policy, projects that low-income households would see an overall financial loss from the bill. Cuts to programs like Medicaid and SNAP would outweigh any tax savings for households earning $51,000 or less. In contrast, the top 10% of earners would capture the majority of the legislation’s total benefits, with about 70% of the overall value flowing to this group.
Here’s how the bill could impact the after-tax income of households across the economic spectrum:
| Income Group | Average Change in After-Tax-and-Transfer Income in 2026 | Median % Change in After-Tax-and-Transfer-Income in 2026 |
|---|---|---|
| $0 – $17,000 | -$820 | -5.7% |
| $17,000 – $51,000 | -$430 | -0.8% |
| $51,000 – $93,000 | $840 | +1.2% |
| $93,000 – $174,000 | $3,000 | +2.1% |
| $174,000 – $263,000 | $5,515 | +2.5% |
| $263,000 – $388,000 | $7,570 | +2.2% |
| $388,000 – $988,000 | $17,835 | +3.2% |
| $988,000 – $4,325,000 | $41,010 | +2.1% |
| $4,325,000+ | $390,070 | +2.8% |
The Institute on Taxation and Economic Policy (ITEP)—a left-leaning economic think tank—offered similar conclusions. The ITEP estimates that 68% of the tax cuts offered under the plan in 2027 will go to the top 20% of households. While the top 1% of families will receive 20% of the tax cuts, just 14% of the cuts will benefit families earning $75,000 or less, according to the ITEP analysis.
Social Program Cuts
To offset some of the tax cuts, the bill proposes significant reductions in social safety net programs. According to the CBO, Medicaid would face billions of dollars in cuts, potentially leading to over 7.8 million people losing coverage. In total, the CBO estimates that 10.9 million people will lose their health insurance as a result of the bill.
Meanwhile, the Supplemental Nutrition Assistance Program (SNAP) would see $267 billion in cuts, with added work requirements that could affect millions, according to the CBO.
Effect on GDP
The White House projects that the bill will boost gross domestic product (GDP) by up to 5.2% in the short term and increase wages significantly. However, independent analysts are skeptical, projecting a more modest GDP increase and warning that long-term benefits may not materialize.
Will the Trump Tax Brackets Pass?
Trump and Johnson narrowly secured House Republican support for the bill, which passed by a margin of 215-214. Only two Republican representatives voted against the legislation, with another voting “present.” However, the future of the bill as presently constituted remains uncertain. It will likely face unanimous opposition from Democrats in the Senate, as well as potential changes that Senate Republicans want.
GovTrack.us, a non-governmental website that tracks the status of federal legislation, gives the bill a 55% chance of being enacted. Republicans, who control the chamber by a 53-47 margin, can afford only three “no” votes from within their ranks and still pass the legislation (The Vice President votes to break a 50-50 tie.)
Trump has called on Congressional Republicans to pass the bill and have it on his desk to be signed by July 4.
Potential Stumbling Blocks
Among Republicans, fiscal conservatives have expressed concerns about the bill’s projected addition of trillions to the national debt. They have demanded deeper and more immediate spending cuts, particularly to programs like Medicaid and green energy subsidies.
When asked by CNN how many Republican senators share his concerns about the bill’s impact on the national debt, Sen. Ron Johnson (R-Wisconsin) said: “I think we have enough to stop the process until the president gets serious about spending reduction and reducing the deficit.”
Meanwhile, other Republicans have expressed apprehension about the bill’s cuts to Medicaid, including Sens. Susan Collins (R-Maine) and Josh Hawley (R-Missouri).
“I am looking very carefully at the Medicaid provision, and in particular, I’ve been very concerned about the impact on children, on people with disabilities, on seniors who are eligible for both Medicare and Medicaid, and for low-income families,” Collins told WMTW in Maine. “The House bill tries to thread the needle. I’m not certain that they succeeded, but I’m still looking at the specifics.”
“Republicans need to open their eyes: Our voters support social insurance programs. More than that, our voters depend on those programs,” Hawley wrote in a May 12 op-ed in the New York Times.
Democrats unanimously oppose the bill, criticizing it for favoring the wealthy while proposing cuts to social safety net programs. They argue that the bill’s tax cuts disproportionately benefit high-income earners and corporations, while reductions in Medicaid and SNAP would harm vulnerable populations.
Bottom Line
With the expiration of current tax provisions approaching, Congressional Republicans are working to pass Trump’s tax plan, which would make his 2017 tax cuts permanent. Whether the proposed changes move forward or stall, adjustments to deductions, credits and brackets could reshape how income is taxed across different households.
Tax Season Tips
- You may be able to take advantage of tax minimization strategies by working with a financial advisor who offers tax planning. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- See if you’ll be getting a refund or if you’re likely to have to send a check to the government by using SmartAsset’s tax return calculator. This can be useful for your household budget. Plus, it helps you know what to expect when you go through with actually filing.
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