Senate Proposes Noteworthy Tax Changes: What Investors and Business Owners Should Know

Key Provisions for Individuals and Families

The Senate wants to lock in a number of 2017 Tax Cuts and Jobs Act (“TCJA”) provisions to make them permanent. This includes lower individual tax brackets and the increased standard deduction.  This is projected to reach $32,000 for married couples in 2026 and adjusted for inflation thereafter.

The child tax credit would be bumped to $2,200 per child, and the $1,400 refundable portion would become permanent.

Retirees could benefit from a new temporary $6,000 deduction for taxpayers age 65 and over. Also notable: a proposal to make the popular 20% Qualified Business Income (“QBI”) deduction permanent, with expanded phaseout thresholds for service businesses.

However, the controversial $10,000 cap on state and local tax (“SALT”) deductions remains a sticking point. While the House aimed to increase the potential deduction to $40,000, the Senate retains the $10,000 limit for now. The bill would also close some common SALT cap workarounds for business owners called “pass through entity taxes.”

I file a lot of pass-through entity tax returns to save taxes for my business owner clients so losing this one kind of hurts.

Other proposals include:

• A permanent repeal of the Pease limitation (which previously capped itemized deductions for high earners)
• A new charitable deduction for non-itemizers (up to $2,000 for couples)
• Deductions for tips and overtime pay, with phaseouts beginning at $150,000 of income for single filers and $300,000 for married couples filing jointly
• Expanded use of 529 plans and increased child/dependent care credits

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Small Business and Corporate Highlights

For business owners, there are several provisions worth watching. The Senate is proposing:

• 100% bonus depreciation, made permanent starting January 19 2025 (i.e., effective for the 2025 tax year)
• Section 179 expensing cap increased to $2.5 million
• R&D costs incurred in the U.S. could once again be deducted immediately, rather than amortized over five years (with retroactive relief for some filers)
• An increase in the employer-provided childcare tax credit from $150,000 to $500,000, with special rules for small businesses
• Expansion of the Opportunity Zones program, with a more targeted definition of qualifying areas

These moves aim to create long-term incentives for domestic investment and innovation.

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What’s Next and What It Means for You

The Senate is aiming to finalize this bill in the coming weeks, with pressure mounting from broader budget negotiations and growing political urgency. I watched Senator Ron Johnson on CNBC earlier this week, and he, on the other hand, wants to stall things until the Senate discusses more spending policy and not just tax/revenue policy.

As this political “sausage is made,” key areas like the SALT deduction cap, clean energy incentives, and healthcare provisions are still on the table, and we expect much debate before anything becomes law.

For now, this is a draft and not a done deal. Even though nothing is final, having clarity about what’s being proposed helps us plan well.  This is especially relevant to business owners for the aforementioned bonus depreciation and pass-through entity taxes.

We are watching every development closely and modeling how these proposals may impact your financial picture. If provisions like expanded deductions or permanent rate changes go into effect, they could meaningfully shift the timing or structure of strategies like Roth conversions, charitable giving, business reinvestment, or estate transfers.

Anyway, I am noodling on the tax law so you don’t have to.

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