The Republican Tax Bill Has Passed the House: What It Means for You

You don’t have to be a close follower of political news to know that tax reform is once again at the top of the news cycle out of Washington. On Capitol Hill, the House of Representatives, which is under Republican leadership, recently passed a sweeping tax bill based on President Trump’s tax plan. The bill, one of the most far-reaching of its kind in years, has the potential to reshape the financial future of millions of Americans.

Billed as an extension of the 2017 Tax Cuts and Jobs Act, which was also under the direction of President Trump, the newest legislation touches virtually every aspect of the US Tax Code, including individual income brackets, business write-offs, and family tax credits.

Before we dive into what the new tax bill means, it’s important to understand that the bill still faces a tough road in the Senate. While many experts agree that the Senate will likely force some modifications to the bill. Still, the bill passing the House of Representatives is a major step.

Whether you’re a salaried employee, a small business owner, a retiree, or an average American trying to better understand an already complex tax system, the changes presented in the bill as it’s written may have a direct impact on your life. Let’s break down the bill and what it could mean for you.

What’s in the Bill? A Quick Overview

Formally titled the Tax Relief for American Families and Workers Act, the Republican tax bill includes multiple provisions for extending tax cuts that President Trump put into place during his first administration. In addition to extending those cuts, the bill includes measures targeted at families and small businesses.

The lower tax rates for individuals that President Trump’s first administration passed were set to expire after 2025. The bill extends those cuts. The newest bill also includes an expansion of the standard deduction and child tax credit, while also offering enhanced deductions for self-employed workers and small business owners.

When it comes to businesses, the new tax bill restores a business’ ability to expense everything on capital investments. There are also incentives for companies to open businesses in the United States, especially those that offer jobs in manufacturing.

According to the Congressional Budget Office (CBO), the new bill could cost the nation around $1 trillion over the next 10 years. Those who support the bill believe that it will fuel economic growth and benefit middle-class Americans. However, critics believe that the bill specifically aims to benefit corporations and those who are already wealthy while further increasing the ever-growing national deficit.

How The New Tax Bill Could Impact Individual Taxpayers

The most immediate effects of President Trump’s latest attempt at tax reform will be felt by individual taxpayers, not large corporations. It’s expected that those who currently fall in the middle-income and upper-middle-income brackets will notice the biggest change in their annual tax returns.

For instance, a married couple earning $150,000 could save between $2,000 and $3,000 annually. Higher earners would continue to benefit from the reduced top marginal tax rate of 37%. On the surface, the continuation of these lower rates seems like a win for most people. However, the benefits become even more prominent the higher your income goes.

Still, the new tax bill would give a boost to the standard deduction, taking it from $13,850 to $14,500 for individuals while also jumping from $27,700 to $29,000 for married couples filing jointly. These changes mean more income can be shielded from taxation, which can simplify filing and reduce liabilities for households that don’t itemize their deductions. However, critics of the Republican tax bill believe that the increase is so small that it may be offset by inflation or the elimination of other deductions.

The new tax plan also includes changes to the child tax credit, which has served as a lifeline for many families since the days of the pandemic. The plan, as it is currently written, would expand that bill, which comes as no surprise since Vice President Vance has long been vocal about his belief that American families should have more children.

The new bill includes a plan that would phase in a larger refundable portion for parents, culminating in them being able to receive $2,000 per child. The new bill also includes some very detailed income thresholds that would make more households eligible for refunds. This is great news for low-income families who have struggled to claim the full credit amount under previous rules. However, the expansion is significantly smaller than Democrats had pushed for in earlier proposals.

What It Means for Small Businesses and the Self-Employed

For entrepreneurs, freelancers, and small business owners, the proposed tax bill carries a lot of major implications, mostly in the form of tax relief. The bill extends the 20% deduction for pass-through income from LLCs, S corporations, and sole proprietorships. All of those deductions were slated to end at the end of 2025, much to the chagrin of business owners. By extending the deductions beyond the end of this year, business owners can reduce their taxable income. However, there are some eligibility rules that still apply, especially for “specific business services” like consultants and law firms.

One of the biggest pieces of news for business owners is the ability to once again claim 100% of their costs for capital investments, including machinery, vehicles, and software. This full expensing was phased out in 2023 under the Biden administration, but the new bill reinstates it through the end of 2026. Business owners would only be allowed to claim 100% of the cost of their capital investments for the year that the equipment was purchased.

Finally, the new tax bill includes tax relief for companies that expand their operations and create jobs in the United States. This is in line with promises that President Trump made during his last election campaign. These tax incentives are especially prevalent in areas that have been labeled “opportunity zones” by members of the President’s staff. These incentives are designed to appeal to economic conservatives and lawmakers in the Rust Belt who want to promote local job growth.

What’s Not in the Bill—and Why It Matters

President Trump’s tax bill makes big moves in several areas while also building on the foundation that was put into place during his first presidency. However, as is the case with any bill, it’s as important to look at what’s not in the Republican tax bill as it is to understand what it contains.

Many lawmakers in democratic states have pushed for changes to the cap on the State and Local Tax (SALT) deduction. This part of the tax code limits how much filers can write off for property and income taxes. Under the new bill, the cap remains at $10,000, which is a bit of a sore spot for high-tax states like California, New York, and New Jersey. While there were some efforts to raise or eliminate the cap, those were blocked during negotiations, with many experts saying that it was an effort to avoid inflating the overall cost of the bill.

The new bill also does not address capital gains taxes or step-up basis rules, which means that those policies will remain intact. Investment income will continue to be taxed at the rate, which is quite favorable for investors. However, it’s a sticking point for critics of the bill who want to close what they consider tax loopholes for the wealthy.

It’s also important to note that, just like its predecessor in 2017, the new tax bill is temporary. Many of the provisions outlined in the bill expire over the next five to seven years, unless they are extended once again. This sets the stage for more tax debates to take place in Congress, regardless of who the next President is. That level of uncertainty makes long-term financial planning difficult, especially for businesses that rely heavily on future projections.

Will It Become Law? What Comes Next

The House passing the bill is the first step, but it still faces a tough climb through the Senate, where Democrats hold a narrow majority. The passage of the new tax bill will require at least some bipartisan support, something that many commentators believe will be hard to achieve.

In addition to Democrats who believe the bill favors the wealthy, some moderate Republicans are wary of the bill’s potential impact on the national deficit. Still, there are some facets of the bill, like the child tax credit and self-employed incentives, that have bipartisan support. Ultimately, the decision won’t be made until the bill makes its way to the Senate.