Analyzing The Individual Tax Provisions Of The House Republicans’ 2025 Proposed Tax Bill

On Monday, May 12, Republicans on the House Ways and Means Committee unveiled their long-anticipated tax legislation to be included in the House's wide-ranging reconciliation bill. The proposal marks the culmination of years of speculation about the fate of the Tax Cuts and Jobs Act (TCJA), most of which is set to expire on December 31, 2025.

In the months since Republicans took control of the House, Senate, and White House in the 2024 elections, there has been much speculation about what they would include in their tax bill: Would TCJA be extended permanently, or only for a limited amount of time with another ‘sunset' date in the future? Which parts of TCJA would be altered from the law as it currently exists? Would Republicans seek to take advantage of their current ‘trifecta' to put more tax provisions on the table? Until now, though, there were no detailed tax measures offering insight into their plans.

That all changed with the release of the House Republicans' whopping 389-page tax bill. Not only does the measure propose to permanently extend many of the key elements of TCJA, but it also adds additional (mostly temporary) provisions aimed at further reducing taxes for many households across the income spectrum. And while there will still likely be changes to the legislation – both in its journey through the House and in reconciliation with the Senate – it nonetheless offers the clearest picture yet of what congressional Republicans hope to accomplish before TCJA's expiration at the end of the year.

For advisors seeking insight into how their clients could be affected by the House Republicans' plans, reviewing the new proposal offers a clear look at what's ‘officially' on the table that would (if passed) replace and augment TCJA.

Core Provisions Of TCJA Extended Permanently (With Some Temporary Increases)

The House proposal aims to lock in many of the original provisions from TCJA, while layering in several new tax breaks, with some lasting only a few years and others permanent. The most impactful changes begin with extensions to the basic tax brackets, standard deduction, and other elements of the original TCJA.

Tax Brackets Permanently Extended

Unsurprisingly, the House Republican proposal permanently extends the original TCJA's tax bracket structure of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. While there was some speculation that an additional 39.6% bracket would be added for taxpayers with over $1 million of income, that provision didn't make it into the House proposal.

Standard Deduction Extended, With Temporary Increases

The measure would also permanently extend one of TCJA's core features: the increased standard deduction, which currently amounts to $15,000 for single filers, $22,500 for heads of household, and $30,000 for joint filers in 2025. In addition, the legislation includes temporary increases to the standard deduction from 2025 through 2028.

First, for all taxpayers, the standard deduction during those years would increase by $1,000 for single filers, $1,500 for head of household filers, and $2,000 for joint filers (with those amounts adjusted for inflation).

Second, for individuals who are age 65+ (who, under the current law, already receive an additional standard deduction of $2,000 for single or head of household filers, or $1,600 per spouse filing jointly), the proposed legislation adds a $4,000 per-person ‘bonus' deduction. While the current additional standard deduction is available for taxpayers who are age 65+ or blind, however, the proposed ‘bonus' deduction would only be available to those age 65+.

The bonus amount phases out for households whose Modified Adjusted Gross Income (MAGI) exceeds a certain threshold limit ($75,000 for single and head of household filers or $150,000 for joint filers). The deduction is reduced by 4% of the MAGI above those thresholds, meaning the bonus is fully phased out at $175,000 of MAGI for single filers and $250,000 for joint filers. Unlike the ‘normal' standard deduction, the bonus standard deduction is not indexed to inflation, but would remain at $4,000 for the years it was in effect.

Notably, the additional bonus standard deduction would be available to individuals who are age 65+, regardless of whether they normally take the standard deduction or itemize. If they itemize, the bonus would be included as a below-the-line deduction – deducted after Adjusted Gross Income (AGI) is calculated – in addition to their itemized deductions.

Under the proposed tax law, then, a married couple filing jointly, where both spouses are age 65 or older, would have a maximum standard deduction of $32,000 (the ‘normal' amount) + $3,200 (the normal age 65+ additional amount for both spouses) + $8,000 (the new ‘bonus' amount for both spouses) = $43,200 in 2025.

Child Tax Credit Extended, With Temporary Increase

The Child Tax Credit, which has been set at $2,000 per qualifying child under the age of 18 since TCJA went into effect, was scheduled to go down to $1,000 after 2025. The Republican tax proposal would temporarily increase the credit to $2,500 per qualifying child from 2025 through 2028. Starting in 2029, the credit would return to $2,000, but would then be indexed to inflation using 2024 as the base year for inflation adjustments.

Importantly, the Child Tax Credit consists of two parts: a nonrefundable portion, which can reduce a household's actual tax liability down to $0 but doesn't provide any refund beyond that; and a refundable Additional Child Tax Credit portion, which can generate a refund even if the taxpayer owes no tax.

The proposal's temporary increase would apply only to the nonrefundable Child Tax Credit, not the refundable Additional Child Tax Credit. The refundable amount, originally set at $1,400 per qualifying child in 2017 and adjusted for inflation to $1,700 as of 2024, would mostly stay the same - the only proposed change is a minor adjustment in the base year for inflation adjustments from 2016 to 2017. So, as shown below, anyone whose tax liability is less than the refundable amount wouldn't benefit from the temporary increase.

The measure would also maintain TCJA's income phaseout thresholds for the Child Tax Credit ($200,000 for single filers and $400,000 for joint filers). The credit would continue to phase out by $50 for every $1,000 of AGI above those limits. These thresholds are not indexed to inflation, however, and would remain fixed at those levels unless changed by future legislation.

In addition, the proposal would retain TCJA's requirement that a valid Social Security Number (SSN) be provided for the qualifying child, and adds a new rule that would require the parent (or both spouses if filing jointly) to also provide their own SSNs to claim the credit. This would mean that in cases where one spouse lacks an SSN (e.g., when one spouse is a non-US citizen using an Individual Tax Identification Number), the credit would be disallowed unless both spouses obtained an SSN or the spouse with an SSN filed their return separately.

Finally, the legislation would retain TCJA's $500 credit for other dependents who are not qualifying children (e.g., children age 18 or older and other qualifying relatives). Unlike the Child Tax Credit, however, the $500 credit for other dependents would not be adjusted for inflation.

Other Permanent Extensions

Many of TCJA's other core provisions would be permanently extended with no additional changes under the House Republicans' proposed legislation. These include:

• The elimination of personal exemptions;
• The increased Alternative Minimum Tax (AMT) exemptions ($88,100 for single and $137,000 for joint in 2025) and phaseout thresholds ($626,350 for single and $1,252,700 for joint in 2025);
• The $750,000 limit on mortgage debt eligible for interest deduction, and the disallowance of interest deductions on home equity loans unless the funds are used to acquire, construct, or substantially improve the taxpayer's residence;
• The elimination of miscellaneous itemized deductions exceeding 2% of AGI (including expenses such as investment fees, unreimbursed employee costs, and tax preparation fees);
• The elimination of the income exclusion for reimbursements of qualified bicycle commuting expenses; and
• The elimination of the deduction for moving expenses, except for those claimed by active-duty members of the armed forces.

SALT Cap Increased To $30,000 (Or More?)

One of the most contentious political debates surrounding TCJA involved the State and Local Taxes (SALT) deduction, which TCJA limited to $10,000 per tax return – with no annual inflation adjustment or higher limit for joint filers. The debate on the SALT cap has broken down along both party and geographic lines, with both Democratic and Republican legislators from higher-tax states like New York, New Jersey, and California arguing that the $10,000 cap amounts to a significant tax increase for their constituents, who often pay significantly more than $10,000 each year between income and property taxes.

When TCJA passed in 2017, Republicans had a wide enough majority to enact the SALT cap despite objections from legislators in high-tax states. But with only a 220–213 majority in the House and a 53–47 split in the Senate in 2025, Republicans can't afford to lose more than three votes in either chamber, making concessions necessary to make sure the bill has enough support to pass. In that context, it seemed inevitable that the Republicans' proposed legislation would increase the SALT cap, but the only question was by how much.

The House Ways and Means Committee bill raises the SALT cap to $30,000. As with TCJA, however, the cap is neither indexed to inflation nor increased for joint filers. For married spouses filing separately, the SALT cap would be $15,000.

Furthermore, the proposed SALT cap would be subject to an income-based ‘phasedown' for taxpayers with AGI of 400,000–$500,000 (or $200,000–$300,000 for married filing separately). The SALT deduction limit would be reduced by 20% of the AGI minus the lower threshold, down to a minimum deduction of $10,000 ($5,000 for married filing separately).

New Restrictions On PTET Workarounds

In conjunction with the modified SALT cap, the proposal would also restrict the use of Pass-Through Entity Taxes (PTETs), which many states have implemented to allow certain pass-through business owners to bypass the individual SALT deduction limit. In essence, PTETs allow partnerships and S corporations to pay state taxes on their owners' behalf and deduct those payments as business expenses for Federal tax purposes. Put differently, by treating state taxes as a business expense rather than a personal one, PTETs allow partnership and S corporation owners to fully deduct those tax payments for Federal purposes, avoiding the $10,000 SALT cap that applies to individual filers.

The PTET strategy became widespread after it was condoned by the IRS in Notice 2020-75; however, the legality of deducting PTET payments as a business expense was never explicitly written into the Internal Revenue Code. The Republican proposal would nullify Notice 2020-75, effectively ending the viability of PTETs by disallowing partnerships and S corporations from taking any deduction for a state or local tax paid on behalf of their owners. Instead, those taxes would be treated as personal, and thus subject to the proposed $30,000 SALT cap.

Without the ability to circumvent the SALT cap, there isn't much reason for partnerships and S corporations to continue to use PTETs, especially given the often onerous accounting and paperwork and the risk that partners often end up paying more in state tax under a PTET election (which, until now, has been more than made up for by the potential Federal tax savings). And so it appears likely that PTETs could fade away if the proposed legislation becomes law.

Itemized Deduction Limitations For The 37% Tax Bracket

Up until 2017, higher-income taxpayers who itemized deductions were subject to the Pease limitation, which reduced the total allowable amount of a taxpayer's itemized deductions by 3% of the amount by which their AGI exceeded a threshold – $261,500 for single filers, $287,650 for head of household filers, and $313,800 for joint filers in 2017. The effect was roughly equivalent to a 1% surtax on income for itemizers above those thresholds.

TCJA temporarily suspended the Pease limitation, which is scheduled to return upon TCJA's sunset at the end of 2025. However, the House Republicans' proposal would permanently repeal the Pease limitation, replacing it with a different limitation on itemized deductions – but only for higher-income taxpayers in the top 37% Federal tax bracket (with taxable income above $626,350 for single and head of household filers, or $751,600 for joint filers).

The proposed limitation would reduce taxpayers' allowable itemized deductions by 2/37 of the lesser of:

• Their total itemized deductions; or
• The amount by which their taxable income plus total itemized deductions exceeds the 37% bracket threshold (before taking the itemized deduction limitation into account).

Why 2/37? The goal of the limitation is to reduce the tax value of itemized deductions for those in the top tax bracket who, by the math of how deductions from taxable income translate into hard-dollar tax savings, stand to benefit more from their deductions than those in lower brackets. For example, under current law, a taxpayer in the 37% bracket receives a 37-cent reduction in tax for every $1 of deductions claimed. By reducing allowable deductions by 2/37, the effective tax benefit of those deductions would drop from 37% to 35% – a way to preserve some of the deduction's value while narrowing the benefit for the highest earners.

Example 1: Anna and Bennett are a married couple with $1 million in AGI and $200,000 of itemized deductions, resulting in $800,000 of taxable income (which puts them in the 37% marginal tax bracket).

Under current law, Anna and Bennett can fully deduct their itemized deductions, saving $200,000 × 37% = $74,000 in tax.

Under the proposed law, however, their itemized deductions would be reduced by 2/37 times the lesser of:

• Their total itemized deductions of $200,000; or
• The amount by which their taxable income ($800,000) plus itemized deductions ($200,000) exceeds the 37% bracket threshold ($751,600), or ($800,000 + $200,000) − $751,600 = $248,400.

Which means their total allowable itemized deductions would equal $200,000 – (2/37 × $200,000) = $189,189.

The tax savings from these deductions under the proposed law would be $189,189 × 37% = $70,000. Which equals 35% of their total itemized deductions.

Section 199A Deduction Extended, With Amended Phaseout Rules That Benefit High-Income SSTB Owners

TCJA created a major new tax deduction for pass-through business owners (i.e., sole proprietorships, partnerships, and S corporations) through the Section 199A deduction for Qualified Business Income (QBI). In short, Section 199A allows eligible business owners to deduct up to 20% of the lesser of their QBI from qualifying pass-through businesses or their total taxable income (minus net capital gains).

The Section 199A deduction is set to expire at the end of 2025, along with most other TCJA provisions. However, the House Republicans' proposed legislation would make the deduction permanent, and increase the maximum deduction from 20% to 23% of the lesser of QBI or total taxable income.

Proposed New Phaseout Rules Benefiting High-Income SSTB Owners

The proposed legislation also makes significant changes to how the Section 199A deduction is phased out at higher income levels, limiting the deduction in some cases and eliminating it entirely in others.

Under current law, business owners with taxable income over the applicable threshold – $197,300 for single filers and $394,600 for MFJ – are subject to a phaseout range of $50,000 (single) or $100,000 (MFJ).

For owners of a Specified Service Trade or Business (SSTB) – doctors, lawyers, consultants, accountants, financial advisors, athletes, or artists – the deduction is phased out entirely over their applicable income range. The reduction is calculated as the ratio of the amount by which taxable income exceeds the threshold to the full phaseout range.

For instance, a married SSTB owner with $80,000 of income above the threshold would lose $80,000 ÷ $100,000 (the total phaseout range for married filers) = 80% of their deduction. Once taxable income exceeds the threshold by $100,000 or more, the deduction is fully eliminated.

For non-SSTB owners, the deduction also phases out over the same income ranges ($50,000 for single filers and $100,000 for MFJ), but not to $0. Instead, it phases down to the Wage and Depreciable Property (WDP) limit, which is defined as the greater of:

• 50% of the business's W-2 wages; or
• 25% of W-2 wages plus 2.5% of the unadjusted basis of depreciable property owned by the business.

For example, a married non-SSTB owner with $80,000 of income above the threshold would lose $80,000 ÷ $100,000 = 80% of the difference between their full 20% QBI deduction and the applicable WDP limit.

The House proposal would replace the current phaseout structure for both SSTB and non-SSTB owners. Although the current phaseout thresholds ($197,300 for single and $394,600 for married filers) would stay the same, the $50,000 and $100,000 phaseout ranges would be eliminated. The new rule replaces the ratio-based phaseout reductions with a (slightly) simpler calculation, where the deduction for taxpayers over the phaseout thresholds would equal 23% of their QBI minus 75% of the amount by which taxable income exceeds the phaseout threshold. 23% x QBI minus 75% x (taxable income – phaseout threshold)

For SSTB owners, the deduction could still be reduced to $0. But for non-SSTB owners, it would bottom out at the WDP limit.

The key implication of the proposed legislation's new phaseout calculation for SSTB owners is that the deduction would no longer automatically disappear once taxable income exceeds the phaseout range. As long as the business owner has sufficient QBI, there's theoretically no limit to the amount of taxable income they could have and still be eligible for some amount of Section 199A deduction.

Example 2: Charlotte is a married owner of an accounting firm (an SSTB). Her firm generates $600,000 of QBI, and Charlotte has $500,000 of taxable income after deductions.

Under the current rules, Charlotte would be fully phased out of the Section 199A deduction, since her income is more than $100,000 over the $394,600 phaseout threshold for joint filers.

However, under the proposed law, Charlotte would be eligible for a deduction of (23% × $600,000) – [75% × ($500,000 − $394,600)] = $58,950.

At the 32% marginal tax bracket, her tax savings from the extra deduction under the new rules would be 32% × $58,950 = $18,864.

If enacted, this change would provide a meaningful benefit for high-income SSTB owners whose income is largely composed of QBI. Doctors, lawyers, and financial advisors – who currently lose the deduction once their income exceeds the phaseout range – would instead be eligible for a reduced but potentially still substantial deduction. Even a Section 199A deduction that's not the full 23% of QBI could still amount to thousands or tens of thousands of dollars in tax savings.

Proposed New Deductions

Beyond extending and modifying existing provisions, the proposed law also introduces several new deductions – most notably, provisions that aim to provide tax relief for workers who earn income through tips and overtime, and for certain individuals with auto loans.

"No Tax On Tips" And "No Tax On Overtime"

On the 2024 campaign trail, Donald Trump introduced a pair of unexpected proposals that would exempt both tip income and overtime wages from taxation. The idea was surprising because both tips and overtime have long been treated as taxable compensation subject to income and payroll taxes, and there has been no established policy rationale for exempting them – other than their frequent association with working-class voters Trump sought to appeal to. But once Trump won the presidency, he maintained pressure on congressional Republicans to incorporate his proposals in the emerging tax bill.

The resulting provisions – labeled "No Tax on Tips" and "No Tax on Overtime" – appear in the proposed legislation and would apply from 2025 through 2028. Rather than excluding tips and overtime from gross income, the bill would instead allow separate deductions equal to the amount of qualified tips and overtime income earned.

To qualify for the No Tax on Tips deduction, tip income must meet several conditions:

1. The taxpayer must work in an occupation that "traditionally and customarily" received tips prior to 2025 (with the IRS to provide a list of such occupations following the bill's passage);
2. The tips must be voluntary and not mandated as part of the service provided;
3. The tips must not be earned through an SSTB as defined in IRC Section 199A (e.g., lawyers, accountants, and financial advisors are excluded, though musicians, artists, and entertainers – who often do receive tips – are also excluded); and
4. The taxpayer cannot be a "highly compensated employee" as defined in IRC Section 414(q)(1), which entails either being at least a 5% owner or earning more than $160,000 in compensation during the prior year.

The overtime deduction would apply to the amount of overtime compensation paid above an employee's normal rate. For example, if an employee earns $20 per hour in base wages and $30 per hour for overtime, only the extra $10 per hour for overtime wages would qualify for the deduction, not the $20 hourly base rate.

Example 3: Dorothy is an administrative assistant who earns $20/hour in base wages and $30/hour for overtime.

This year, she worked 20 hours of overtime, earning $30 × 20 = $600 total for these hours.

Of this amount, the portion corresponding to her base wage rate ($20 × 20 = $400) would be included in her taxable income, while the portion corresponding to her additional overtime pay ($10 × 20 = $200) would be eligible for the overtime deduction.

Like the tip deduction, the overtime deduction is not available to highly compensated employees.

Notably, both the tip and overtime deductions would be treated as below-the-line deductions, taken after the calculation of AGI. Meaning that, while the deductions reduce taxable income, the tip and overtime income would still be included in AGI. As a result, the income still factors into any AGI-based calculations, such as the 7.5% hurdle rate for itemizing medical deductions, the Child Tax Credit, and the proposed SALT cap phaseouts.

However, despite being below-the-line deductions, both deductions would be taken separately from a taxpayer's itemized deductions, similarly to the Sec. 199A deduction. Which means that both deductions would be available regardless of whether the individual claims the standard deduction or itemizes their deductions.

Both tips and overtime pay would also still be subject to payroll taxes for Social Security and Medicare.

In short, the ultimate impact of the bill wouldn't be to completely eliminate taxes on tips and overtime wages. And while the broader economic impact remains to be seen, there is concern that employers may use the policy to keep base wages low, leaving it to the employees to make up for the lower wage rate by relying on longer hours or more tips. This could reduce income stability for the very workers these deductions purportedly aim to help. But in the short term, the proposed deductions do create a significant tax break for workers who rely heavily on tips or overtime wages, at least for the years 2025–2028 when they would be in effect.

New Auto Loan Interest Deduction

Another tax measure that arose on the 2024 campaign trail was to make interest on auto loans tax-deductible. Consequently, the Republican proposal includes a new deduction for "qualified passenger vehicle loan interest" that would take effect from 2025 through 2028.

The deduction would apply to interest on loans used to purchase a new or used vehicle for personal use (i.e., not for business or resale). Notably, the deduction would only apply to interest from new loans taken out after December 31, 2024. While interest on auto loans taken earlier would not be deductible, interest on an existing loan that's refinanced in 2025 or later would be eligible for the deduction, as long as it doesn't add to the balance of the original loan. However, a new loan taken out on a car that's already paid off would not be eligible for the deduction.

A wide range of vehicles would qualify for the deduction, including traditional passenger vehicles like cars, vans, SUVs, pickups, and motorcycles, as well as recreational vehicles like ATVs, campers, and trailers. The caveat, though, is that to be eligible for the interest deduction, the vehicle must be assembled in the United States. While this still includes a relatively broad range of vehicle makes and models, the rule could still cause confusion for people who assume their vehicle qualifies when it turns out not to.

The proposed rule doesn't have any restrictions on the number of loans eligible for the deduction, but it does cap the total amount of deductible interest at $10,000 per year (not indexed to inflation). Additionally, the deduction would phase out by $200 for every $1,000 of MAGI over the thresholds of $100,000 for single filers and $200,000 for joint filers. This means the deduction would be completely phased out for single filers with over $149,000 of MAGI and joint filers with over $249,000 of MAGI.

The other notable aspect of the proposed auto loan deduction is that, unlike the proposed deductions for tips and overtime income, it's structured as an above-the-line deduction. Which means that it would not only be available for households that don't itemize deductions, but it would also lower the taxpayer's AGI and factor into any AGI-related tax calculations. Auto loan interest would also remain deductible for AMT purposes, although most taxpayers eligible for the deduction wouldn't be subject to AMT in the first place.

Interestingly, this wouldn't be the first time that auto loan interest would be deductible. Before the Tax Reform Act of 1986, interest on personal loans – including auto loans – was fully deductible. If this provision becomes law, it would mark the first time in decades that auto loan interest could be deducted, and the first time in many current taxpayers' adult lives.

At a time when both car prices and interest rates have increased sharply (making auto loan payments a significant part of many families' budgets) the deduction could amount to a sizable tax break – at least for those households that meet the income qualifications, purchase or refinance a vehicle between 2025 and 2029, and ensure the vehicle meets the US assembly requirement.

Estate Tax Exemption Raised To $15M Per Person

One of the most significant provisions of TCJA was its doubling of the gift and estate tax exemption in 2018, from $5.6 million to $11.2 million per person. The exemption has since grown to $13.99 million in 2025, meaning that a couple with up to $27.98 million of assets between them could pass away without being subject to estate tax. But with TCJA's sunset, the gift and estate tax exemption was set to decrease again by 50% at the end of 2025, leading to a rising panic among affected families along with a flurry of estate planning moves designed to move assets out of their estates and take advantage of the higher exemption while it's still available.

The House Republican's proposed legislation, however, would prevent the scheduled reduction from happening, and instead slightly increase the exemption – to $15 million per person, or $30 million per couple, in 2026 – with further inflation adjustments after that. If enacted, the change would be a sigh of relief for families with estates up to $30 million. However, families who made large gifts in anticipation of a lower estate tax rate might start to explore ways to unwind those gifts (though any strategy would need to account for the possibility that a future Congress could always decide to reduce the exemption once again).

New Eligible Expenses For 529 Plans

The proposed legislation would expand the types of expenses eligible for tax-free distributions from 529 plans by broadening the definition of "qualified higher education expenses". In addition to the current allowance for K–12 tuition, the measure would add several new K–12-related costs and also introduce a new category of qualified expenses for certain postsecondary credentialing programs.

Expanded List Of K–12 Expenses

First, the legislation would expand the list of K–12 expenses eligible for tax-free 529 plan distributions. Currently, the only K–12-related expense that was eligible for 529 plan purposes was up to $10,000 per year of tuition paid to a primary or secondary school. The proposal would add the following additional expenses:

• Expenses for curriculum materials, textbooks, instructional materials, and online education materials;
• Costs for tutoring provided outside of the home, if the tutor is unrelated to the student and meets specific qualifications;
• Standardized testing fees;
• Dual enrollment fees for postsecondary programs (e.g., college courses taken in high school); and
• Educational therapy costs for students with disabilities, including occupational, behavioral, physical, and speech-language therapies.

The aggregate amount of these expenses, plus K-12 tuition, would still be subject to the $10,000 per year limit.

These expenses would be eligible whether the student is enrolled in public, private, or home school. The proposed rules would apply to any distributions taken after the bill's enactment – meaning that any of the above expenses incurred this year, regardless of whether they were incurred before or after the bill's enactment, could be reimbursed through 529 plan funds if the proposed legislation passes, as long as the distribution is taken after enactment and in the same tax year the expense was incurred.

Postsecondary Credential Expenses

Along with the expanded list of K–12 expenses, the proposed legislation would also allow 529 funds to be used for qualified postsecondary credentialing expenses. The proposed legislation includes three types of eligible costs:

• Tuition, fees, books, and any other expenses required for enrolling in a postsecondary credential program;
• Fees for any exams required to obtain or maintain the credential; and
• Fees for continuing education if required to maintain the credential.

Eligible credentials would include those that are industry-recognized and accredited by major credentialing organizations, apprenticeships registered with the Department of Labor, occupational licenses issued or recognized by a state or the Federal government, and other postsecondary credentials as defined under Section 3 of the Workforce Opportunity Act.

Notably for current or aspiring CFP certificants, the CFP marks appear to meet the proposed definition of a recognized postsecondary credential, as they are accredited by the National Commission for Certifying Agencies (NCCA). Meaning that the costs of education and examination for attaining CFP certification, as well as the costs of continuing education for ongoing maintenance of the certification, could be paid for with 529 plan funds under the proposed rules. (It's less clear whether CFP Board's annual dues would also qualify, since the legislation doesn't explicitly name ongoing membership or administrative fees for maintaining a credential as eligible expenses.)

HSA Reforms

In recent years, there has been a push to reform Health Savings Account (HSA) rules by broadening the range of eligible healthcare costs eligible for tax-free reimbursement and defusing some of the complex eligibility traps that limit who can contribute. Earlier measures like the Health Savings Act of 2023 and the HSA Modernization Act of 2023 sought to address some of these priorities but failed to gain traction in Congress. The new Republican proposal incorporates many of those earlier provisions, as well as some additional ‘sweeteners' to enhance the tax benefits of HSAs.

Perhaps most notably, the proposed legislation would double the HSA contribution limits starting in 2026. For instance, the current 2025 limits are $4,300 for individuals with self-only healthcare coverage and $8,550 for those with family coverage. Under the proposal, those limits would increase to $8,600 and $17,100, respectively (plus inflation adjustments) in 2026.

However, the increased contribution amount would be subject to a phaseout based on MAGI, with the thresholds varying based on both the individual's filing status and type of healthcare coverage:

• For joint filers enrolled in family coverage, the additional contribution limit phases out between $150,000 and $200,000 of MAGI.
• For all others, the additional limit phases out between $75,000 and $100,000 of MAGI.

Once the individual exceeds the upper income limit, they would be phased out of the additional contribution – meaning that they'd be eligible only for the ‘normal' contribution limit of $4,300 or $8,550 (depending on coverage).

Example 4: Erica and Fernando are a married couple who are both enrolled in Erica's High-Deductible Health Plan (HDHP). They have $180,000 of MAGI.

Under the proposal, their maximum HSA contribution would be $17,100, consisting of the ‘normal' $8,550 limit plus the additional $8,550 contribution allowed through the expanded rules. But because their MAGI exceeds the $150,000 phaseout threshold for joint filers with family coverage, they would need to reduce the additional contribution amount.

Their income exceeds the lower threshold by $180,000 − $150,000 = $30,000, representing 60% of the $50,000 phaseout range. Which means that their maximum contribution would be reduced by 60% × $8,550 = $5,130.

Consequently, their total combined contribution would equal $8,550 (normal) + $8,550 (additional) − $5,130 (reduction of the additional) = $11,970.

The proposed legislation would also preserve HSA eligibility for individuals age 65+ who are enrolled in Medicare Part A (but not Part B). This change primarily affects individuals (or spouses of individuals) who continue working beyond age 65 and are covered by an employer's health insurance. Under current law, filing for Social Security benefits automatically enrolls an individual in Medicare Part A, which is considered non-HDHP coverage and therefore disqualifies them from making further HSA contributions.

Another common eligibility trap addressed by the proposed regulation relates to spouses of individuals enrolled in healthcare Flexible Spending Accounts (FSAs). Under the current law, FSAs are generally considered to be non-HDHPs, disallowing anyone covered by them from making HSA contributions, including spouses and dependents. As a result, even if a person is enrolled in an HDHP and not covered by an FSA for themselves, they're still ineligible to make an HSA contribution if their spouse is enrolled in an FSA.

The proposed legislation would fix this by disregarding spousal FSA coverage for HSA eligibility, as long as FSA reimbursements don't exceed the spouse's actual medical expenses.

Other amendments to HSAs under the proposal include:

• Expanding the definition of "High-Deductible Health Plan" to include all Bronze-level and catastrophic health coverage plans under the Affordable Care Act;
• Allowing coverage by direct primary care arrangements and on-site employee health clinics without losing eligibility to contribute to an HSA;
• Adding certain expenses related to physical activity and fitness to the list of HSA-eligible expenses, including health club memberships, fitness classes, and sports leagues (while explicitly excluding golf, hunting, sailing, horseback riding, and one-on-one personal training), capped at $500 per year for single and $1,000 for joint and head of household filers;
• Permitting catch-up HSA contributions for married individuals age 55+ with family health coverage to be made to either spouse's HSA (rather than only their own, as the current law requires);
• Allowing individuals who convert from non-HDHP to HDHP coverage during the year to roll any unused Health Reimbursement Arrangement (HRA) or FSA funds into an HSA; and
• Accepting eligible healthcare expenses incurred before the HSA was established, as long as:

1. 1. The expense was incurred after the individual's HDHP coverage began; and
   2. The HSA was established within 60 days of the date HDHP coverage began.

All of the proposed HSA-related provisions would take effect starting in 2026.

MAGA Child Savings Accounts

One of the more surprising provisions of the proposed legislation is the introduction of a new tax-advantaged savings vehicle called the Money Account for Growth and Advancement (MAGA) account. The account is aimed at helping children build savings for early adulthood expenses such as education, starting a business, or buying a home.

Under the proposed rules, a MAGA account could be opened on behalf of any beneficiary before their 8th birthday. Contributions of up to $5,000 per year (adjusted for inflation) could be made to the account from birth through age 17 (i.e., before the child turns 18). No distributions from the account would be allowed until age 18, after which funds would be accessed in phases:

• From age 18 through 24, the beneficiary can only distribute in aggregate up to 50% of the account balance as of their 18th birthday.
• Starting at age 25, the beneficiary would have unrestricted access to the funds.
• At age 31, the account must be terminated and fully distributed to the beneficiary.

Funds in a MAGA account could be invested only in "eligible investments", defined as mutual funds or ETFs that invest only in diversified US equities, do not use leverage, and minimize fees and expenses.

Contributions to a MAGA account would not be tax-deductible, but earnings could grow tax-deferred. Upon distribution, the original contribution would be received tax-free, while any income would be taxable.

Income distributed for qualified purposes would be taxed at capital gains rates and could be used for:

• Qualified higher education expenses (using the same definition as that for 529 plans, but excluding eligible K–12 expenses);
• Qualified postsecondary credentialing expenses (as proposed for 529 plans and described earlier);
• Small business or farm startup costs (if the beneficiary has obtained a relevant loan); or
• Any amount used for first-time home purchases.

The income portion of any distribution that isn't used for a qualified expense would be taxed as ordinary income and subject to a 10% penalty if the beneficiary is under age 30. At age 31, the account would be terminated, and any undistributed income would be taxable to the beneficiary (at capital gain rates if used for qualified expenses, or at ordinary income rates but without the penalty).

In order to jumpstart the use of MAGA accounts, the measure includes a provision by which the Federal government would automatically open and contribute $1,000 to a new MAGA account for every US citizen born between 2025 and 2028 (although parents would have the ability to opt out if they decided they don't want the account or the money). The legislation would also allow charitable organizations to contribute to MAGA accounts on behalf of eligible individuals.

The question going forward is whether all the restrictions on opening, contributing to, and withdrawing from the proposed MAGA accounts would really be worth the tax benefits they convey. At best, beneficiaries and their families who do everything ‘correctly' with respect to these rules would get the benefit of capital gains treatment on the income portion of their distribution. Which sounds good until you realize that contributing funds to a taxable custodial account like a UTMA or UGMA account would produce almost the exact same capital gains tax treatment.

True, custodial accounts don't provide tax-deferred treatment and would be taxed annually on any dividends or capital gains generated. But given the fact that, for dependent children, the first $1,350 of investment income is tax-free and the next $1,350 is taxed at the child's (presumably low) marginal tax rate, most account holders would probably want to have that income taxed annually when the child is a dependent, rather than once they reach adulthood and start earning actual income and being taxed at higher marginal rates.

And that's the best-case scenario for MAGA account distributions. If the funds were needed for any purpose other than the limited set of qualified expenses, the income portion would be taxed at ordinary rates and subject to a 10% penalty until age 30. For younger beneficiaries, access is even more limited, given that no distributions from the account would be allowed at all before 18, and distributions taken from age 18 to 24 are capped at 50% of the account's age-18 balance.

By contrast, custodial accounts like offer full access to funds – by the custodian up until the child's age of majority (provided the funds are used for the child's benefit), and for the child themselves once they reach the age of majority – with no tax penalties or additional restrictions on early use.

There's usually a tradeoff between tax benefits and flexibility in account types. Accounts like Roth IRAs, HSAs, and 529 plans offer significant opportunities to save on taxes by offering tax-free treatment on qualified distributions, but the distributions can only be used in very specific ways. In contrast, taxable accounts offer much more flexibility in their use, but any income generated on the original investment is taxable (albeit at favorable capital gains rates). The proposed MAGA accounts appear to lie in an awkward middle ground, more restrictive than custodial accounts, but offering much fewer tax advantages than 529 plans, HSAs, or Roth IRAs.

While many families would be inclined to take the ‘free' (taxpayer-funded) $1,000 contribution provided for in the proposed legislation, there's little argument for making additional contributions beyond that, when the MAGA account would offer neither the flexibility of a taxable account nor the tax benefits of other types of tax-advantaged accounts.

Qualified Opportunity Zones Extended

The original TCJA created a new type of investment known as a Qualified Opportunity Fund (QOF), which allowed investors to pool capital into Qualified Opportunity Zones (QOZs) – low-income geographic areas designated by state governments.

QOFs offered the potential for significant tax benefits, particularly for high-income investors. Individuals could sell appreciated investment property (e.g., stocks, funds, or real estate) and reinvest the gains into a QOF. That gain would then be deferred until as late as December 31, 2026 (or whenever the QOF was sold or exchanged, if earlier), allowing for up to eight years of gain deferral between QOFs taking effect in 2018 and the gain recognition date of 2026.

Additional incentives were available for investors with longer holding periods:

• A 10% basis step-up on deferred gain after five years;
• An additional 5% step-up for those who held their QOF for more than seven years, allowing up to 15% of the deferred gain on the original investment to be permanently excluded from taxation; and
• Complete exclusion of post-investment appreciation if the QOF was held for more than 10 years.

With the original QOF program winding down as the gain deferral period approaches its end in 2026, congressional Republicans have opted to reintroduce a modified version of the QOF program but with a narrower scope and updated rules.

Under the measure, states could designate a new round of QOZs between 2027 and 2033, with a slightly more restrictive definition of low-income areas. Starting in 2027, investors could defer capital gains by reinvesting them into a QOF, with deferral lasting until the earlier of 2033 or when the property is sold or exchanged.

As with the original program, investors who hold onto their QOF for at least five years would receive a 10% basis step-up on their deferred gain, although investments in a QOF that invests at least 90% of its assets in rural QOZ property would receive a 30% step-up. In this measure, however, there is no additional 5% step-up for QOFs held for more than seven years. As with the original QOZ program, any gains attributable to the original deferred gain would be excluded from taxation if the QOF is held for more than 10 years. Additionally, an additional $10,000 (beyond the original deferred gain) could also be invested and excluded from tax after 10 years.

Notably, all of these proposed changes appear to only apply to new QOF investments made starting in 2027. For existing investors whose deferred gains are set to be recognized in 2026, there's no way to extend that deferral further; those gains would still become taxable as planned.

Repeal Of Clean Energy Credits

One of the few provisions in the House Republican proposal aimed at increasing taxes on individuals is the proposed rollback of several "clean energy" tax credits originally introduced under the Inflation Reduction Act in 2022. These include:

• The Clean Vehicle Up to $7,500 for a new electric vehicle and $4,000 for a used one.
• Alternative Fuel Vehicle Refueling Property Credit. Up to $1,000 for electric vehicle charging equipment installed at a taxpayer's personal residence.
• Energy Efficient Home Improvement Credit. Up to $1,200 toward the cost of energy-efficiency improvements (e.g., windows, doors, insulation, or heating and cooling equipment, and home energy audits).
• Residential Clean Energy Credit. Up to 30% of the cost of purchasing or installing solar panels, wind power, geothermal heat pump, or fuel cell equipment.

These credits were originally set to expire after 2032 (with the Residential Clean Energy Credit phasing down in 2033 and 2034 and expiring fully in 2035). However, the proposed legislation moves all the expiration dates up to December 31, 2025. Meaning that individuals planning to buy an electric vehicle or install any energy-efficiency upgrades,  such as solar panels, would need to complete the project by the end of 2025 to be eligible for a credit.

Notably, there is still some debate among Republican lawmakers about whether these credits should be phased out as proposed and, if so, how quickly the sunset should occur. While it's not certain that the clean energy credits will end after 2025, individuals already planning to make qualifying purchases or upgrades may want to act sooner rather than later to ensure the work done will still qualify.

Other Provisions

There are a host of other provisions in the proposed legislation that are at least worth noting:

• A permanent extension of TCJA's exclusion from income of student loan debt discharged due to the student's death or disability;
• A permanent extension of TCJA's exclusion from income for up to $5,250 annually for student loan payments paid under an employer's borrower assistance program;
• Making up to $5,000 of the adoption tax credit refundable (and indexing the refundable amount to inflation);
• A tax credit of up to $5,000 for contributions to a charitable organization that provides K–12 scholarships;
• A deduction for charitable contributions of up to $150 (single) and $300 (joint) for standard deduction filers;
• Restoration of 100% bonus depreciation for business property placed in service between January 20, 2025, and December 31, 2029;
• Allowing 100% expensing of research and experimental costs from 2025 through 2029;
• Permanently extending TCJA's provision allowing tax-free rollovers from 529 plans to 529A ABLE accounts; and
• Extending the Saver's Credit to ABLE account contributions starting in 2026, and limiting the Saver's Credit to only ABLE account contributions starting in 2027.

What Happens Now?

Although there appears to be broad agreement among congressional Republicans around preserving the core components of TCJA, key points of contention remain – particularly around the SALT cap, the proposed rollback of clean vehicle and energy tax credits, and the bill's projected $4 trillion increase to the national deficit over the next 10 years. As a result, it remains uncertain what the final bill will include– or whether it will pass at all without major revisions to garner enough votes among the slim Republican majorities to win support in both chambers.

Nonetheless, the proposed legislation provides more clarity than we've had so far about what's potentially on the table as TCJA's scheduled sunset on December 31 approaches. Although some provisions – like the SALT cap – could still change before final passage, and others may be dropped if they are deemed to be too costly, there has been little to no indication that the core TCJA provisions are at risk, given that many Republicans campaigned on not allowing TCJA to expire. The marginal tax brackets, increased standard deduction, Child Tax Credit, reduced AMT exposure, and Section 199A deduction all appear likely to remain intact, with other tax provisions (including those in the current proposal) serving as potential bargaining chips in the final negotiations.

Ultimately, what's left is to wait and see how the final legislation shapes up. The House is targeting a vote by Memorial Day, and the Senate hopes to complete its portion by July 4. If that timeline holds, there may be ample time for taxpayers and advisors to implement any necessary planning actions before the end of the year when many of the provisions are scheduled to take effect, offering at least some runway for thoughtful planning!