Big Beautiful Bill - Senate GOP Tax Plan: Details & Analysis

The Senate Finance Committee introduced its reconciliation taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.
legislation on June 16, 2025, addressing the expirations of the 2017 Tax Cuts and Jobs Act (TCJA) and making additional changes to US tax policy and spending.

Our preliminary analysis of the major tax provisions included in the Senate Finance bill finds it would increase long-run GDP by 1.1 percent. The major tax provisions would reduce federal tax revenue by $4.8 trillion between 2025 and 2034, on a conventional basis. On a dynamic basis, incorporating the projected increase in long-run GDP of 1.1 percent, the dynamic score of the tax provisions falls to $3.9 trillion, meaning economic growth pays for 19 percent of the major tax cuts.

We will update our analysis to include complete effects on budget deficits, interest costs, GNP, and long-run debt-to-GDP when more information on the spending and other tax changes in the Senate package becomes available from the Joint Committee on Taxation (JCT) and Congressional Budget Office (CBO).

Overall, the bill would prevent tax increases on 62 percent of taxpayers that would occur if the TCJA expired as scheduled and significantly improve incentives to invest in the American economy. We are continuing to analyze the complete impact on the federal government’s budget, including increases in deficits and interest costs, and will publish additional updates to our analysis of the Senate Finance bill in the future.

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

Make the expiring rate and bracket changes permanent and increase the inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power.
adjustment by an extra year for 10 percent, 12 percent, and 22 percent brackets.
Make the standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act (TCJA) as an incentive for taxpayers not to itemize deductions when filing their federal income taxes.
increase permanence with an enhancement, starting in 2026 at $32,000 for joint filers, $24,000 for head of household, and $16,000 for all other filers, inflation adjusted thereafter.
Make the personal exemption elimination permanent.
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 incomeFor individuals, gross income is the total pre-tax earnings from wages, tips, investments, interest, and other forms of income and is also referred to as “gross pay.” For businesses, gross income is total revenue minus cost of goods sold and is also known as “gross profit” or “gross margin.”
exceeds $75,000, available from 2025 through 2028.
Make the expiring child tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income rather than the taxpayer’s tax bill directly.
permanent with an increased maximum of $2,200 in 2026, inflation adjusted thereafter; increase the inflation adjustment by an extra year for the refundable portion of the credit in 2026 and inflation adjust thereafter.
Make the $750,000 principal limit for the home mortgage interest deductionThe mortgage interest deduction is an itemized deduction for interest paid on home mortgages. It reduces households’ taxable incomes and, consequently, their total taxes paid. The Tax Cuts and Jobs Act (TCJA) reduced the amount of principal and limited the types of loans that qualify for the deduction.
permanent.
Make the itemized deductionItemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions include those for state and local taxes, charitable contributions, and mortgage interest. An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers.
for state and local taxes (SALT) cap of $10,000 permanent and partially repeal SALT cap workarounds (subject to continued negotiations with the House).
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).
Limit the value of itemized deductions to 35 cents on the dollar for taxpayers in the top tax bracket.
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.
Create a 0.5 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 under a year of the law’s enactment.
Temporarily make up to $25,000 of tip income deducible 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 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

Permanently increase the estate and lifetime gift tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the Internal Revenue Service (IRS), preventing them from having to pay income tax.
to an inflation-indexed $15 million for single filers and $30 million for joint filers beginning in 2026.

Business

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 deductions.
Permanently restore 100 percent bonus depreciationBonus depreciation allows firms to deduct a larger portion of certain “short-lived” investments in new or improved technology, equipment, or buildings in the first year. Allowing businesses to write off more investments partially alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs.
for short-lived investments.
Temporarily provide 100 percent expensing of qualifying structures, with the beginning of construction occurring after Jan. 19, 2025, and before Jan. 19, 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 corporations.
Begin phaseout of clean electricity production credit (45Y) and investment credit (48E) for construction starting in 2026 and fully eliminate for projects beginning construction by 2028, except for baseload power sources such as nuclear, hydropower, geothermal, and battery storage; introduce restrictions related to foreign entities of concern (FEOC).
Repeal clean hydrogen production credit (45V) and the deduction for energy-efficient commercial buildings (179D) after 2025.
Extend the clean fuel production credit (45K) until 2031 and expand eligibility.
Introduce FEOC restrictions for several other credits, including the nuclear production credit (45U), the clean fuel production credit (45K), the carbon oxide sequestration credit (45Q), and the advanced manufacturing production credit (45X); alter phaseouts and eligibility for 45X and 45Q.
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 C corporations.

International

Rename GILTI to Net CFC Tested Income (NCTI) and establish a 12.6 percent to 14 percent top rate after foreign tax credit treatment. Eliminate indirect expense allocation, raise foreign tax creditability to 90 percent, and remove the QBAI (qualified business asset investment) exclusion for the deemed return on physical capital. Also includes some miscellaneous base broadeners that we do not model.
Rename FDII to Foreign-Derived Deduction Eligible Income (FDDEI), and establish a 14 percent rate, with parallel changes to those in GILTI.
Raise the BEAT rate to 14 percent and preserve current policy on allowability of US tax credits under BEAT. Also would broaden the base and exempt payments to high-tax countries where corporations pay a rate of 18.9 percent or higher, which we do not model.

For tax provisions not explicitly modeled we will rely on revenue scores from the JCT, incorporating economic and distributional effects where possible when the JCT estimates become available. Provisions not explicitly modeled include, but are not limited to:

Modify House bill’s Section 899 retaliation against DSTs and UTPRs: up to 15 percent higher income taxes can apply to UTPR countries, while a variety of BEAT disallowances, including a disallowance of the high-tax exemption, would apply to both UTPR and DST countries. The Senate version also delays implementation, in most cases, until calendar year 2027.
Make permanent the CFC “Look-Through” Rule.
Establish a 3.5 percent remittances tax, with many more transactions presumed exempt than under the House version.
Change rules for premium tax credits (PTCs), the CTC, and the earned income tax credit (EITC).
Expand the Section 179 expensing cap to an inflation-adjusted $2.5 million with a phasedown starting when the cost of qualifying property exceeds an inflation-adjusted $4 million; applies after Dec. 31, 2024.
Raise the tax on student-adjusted endowment of certain private colleges and universities in a new bracketed structure with a top rate of 8 percent.
Expand the Section 4960 tax on excess compensation to any employee of an applicable tax-exempt organization that receives remuneration in excess of $1 million.

To incorporate the effects of spending changes on the federal government’s budget, we rely on CBO estimates of non-interest spending changes in the bill.

Long-Run Economic Effects

We estimate, on a preliminary basis, the major tax provisions we modeled would lower marginal tax rates on work, saving, and investment in the United States, leading to a 1.1 percent expansion in the size of the long-run economy. The capital stock would grow by 0.4, and pretax wages would grow by 0.3 percent. Hours worked would expand by 868,000 full-time equivalent jobs.

Over the next decade, we estimate annual GDP growth would be less than 0.1 percentage points higher on average under the tax provisions of the Senate Finance bill.

We will update our estimates on the deficit and GNP effects of the bill when more information becomes available on the bill’s spending and other tax changes.

Table 1. Preliminary Long-Run Economic Effects of Major Provisions in Senate Finance Tax Bill

Note: Details may not sum due to rounding. Source: Tax Foundation General Equilibrium Model, June 2025.

10-Year Revenue Effects

We estimate the major tax provisions modeled would reduce federal revenues by $4.8 trillion between 2025 and 2034. Most of the revenue reduction comes after 2025, when the major provisions of the TCJA are scheduled to sunset.

On a dynamic basis, incorporating the projected increase in long-run GDP of 1.1 percent, the revenue loss falls by about 19 percent, or $898 billion, to $3.9 trillion over the 10-year budget window.

We will update our analysis to include complete effects on budget deficits, interest costs, and long-run debt-to-GDP when more information on spending and other tax changes in the Senate package becomes available.

We provide a detailed revenue table above, available for download.

Table 2. Preliminary Revenue Effects of Major Provisions in Senate Finance Tax Bill

Source: Tax Foundation General Equilibrium Model

Distributional Effects

We model the major distributional effects of the listed tax provisions. The Senate Finance bill would increase after-tax incomeAfter-tax income is the net amount of income available to invest, save, or consume after federal, state, and withholding taxes have been applied—your disposable income. Companies and, to a lesser extent, individuals, make economic decisions in light of how they can best maximize their earnings.
by 2.7 percent in 2025 and 5.1 percent in 2026. The income increase is higher in 2026 because the TCJA individual tax provisions are not scheduled to expire until after the end of 2025.

Because several tax cuts are available only on a temporary basis, the Senate Finance bill would raise market incomes by a smaller 2.8 percent in 2034. However, factoring in the economic growth driven by the plan’s permanent provisions, the bill would raise market incomes by 3.5 percent in 2034 on a dynamic basis.

Middle-income quintiles see the largest income increases in 2026 due to the combination of the individual TCJA extensions and the handful of more targeted tax breaks for specific types of income, like overtime and tips as well as the bonus deduction for seniors (which provide large tax reductions to targeted groups of taxpayers in the middle quintile). Meanwhile, larger after-tax incomes in 2034 are attributable to the permanent individual cuts from TCJA, permanent enhancements of certain provisions, as well as permanent expensing for equipment and R&D investment.

Table 3. Preliminary Distributional Effects of Major Provisions in Senate Finance Tax Bill

Note: Preliminary results include major tax provisions modeled by Tax Foundation and exclude certain other changes until more details on the bill become available. For a full list, see publication. Market income includes adjusted gross income (AGI) plus 1) tax-exempt interest, 2) non-taxable Social Security income, 3) the employer share of payroll taxes, 4) imputed corporate tax liability, 5) employer-sponsored health insurance and other fringe benefits, 6) taxpayers’ imputed contributions to defined-contribution pension plans. Market income levels are adjusted for the number of exemptions reported on each return to make tax units more comparable. After-tax income is market income less: individual income tax, corporate income tax, payroll taxes, estate and gift tax, custom duties, and excise taxes. The 2026 income break points by percentile are: 20%-$17,735; 40%-$38,572; 60%-$73,905; 80%-$130,661; 90%-$188,849; 95%-$266,968; 99%-$611,194. Tax units with negative market income and non-filers are excluded from the percentile groups but included in the totals.Source: Tax Foundation General Equilibrium Model, June 2025.

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