Tax Bill Moves on to the Senate—What's Next?

by Michael Townsend of Charles Schwab, 5/30/25

The massive tax-and-spending bill known as the "One Big Beautiful Bill Act" was approved by the House of Representatives on a 215-214 vote on May 22nd. The bill, which contains much of President Donald Trump's domestic policy agenda, now moves on to the Senate, where it could undergo significant changes.

The narrow House vote was a major victory for House Speaker Mike Johnson (R-La.), who was able to deliver on his pledge to pass the bill before Memorial Day. Both the House and Senate are in recess this week and will return to Washington on June 2nd. Senators are likely to work behind the scenes to develop changes to the bill before bringing it to the Senate floor for consideration later in June.

Here's a look at what's in the bill and what may happen next as the bill moves to the next stage of the legislative process.

Major tax changes

The bill includes trillions of dollars in tax-code changes, including:

  • Makes permanent the 2017 tax cuts. The individual provisions in 2017's Tax Cuts and Jobs Act, which was passed during Trump's first administration, are set to expire at the end of 2025 without congressional action. The One Big Beautiful Bill Act makes those provisions permanent.
  • Increased standard deduction: For 2025 through 2028, the standard deduction will be $16,000 (up from $15,000) for individuals and $32,000 for couples.
  • Increased child tax credit: The current $2,000 child tax credit is made permanent. In addition, the bill temporarily increases the credit to $2,500 for 2025 through 2028.
  • Estate tax: Beginning in 2026, the amount of assets that can be inherited without triggering the estate tax will rise to $15 million. That figure will be indexed to inflation in subsequent years.
  • No tax on tip income. A key pledge from Trump's 2024 campaign, tips will not be taxed for 2025 through 2028, subject to a number of restrictions on who is eligible.
  • No tax on overtime hours. Another pledge from the president's campaign, there will be no tax on overtime hours worked for 2025 through 2028, again subject to restrictions and income limitations.
  • Enhanced deduction for seniors. Seniors ages 65 and older will receive a special deduction of $4,000 for 2025 through 2028. The deduction applies to those who use the standard deduction as well as those who itemize their deductions, but only those with a modified adjusted gross income under $75,000 ($150,000 for couples) are eligible.
  • No tax on car loan interest. Taxpayers are eligible for a deduction of up to $10,000 a year for interest paid on an auto loan, provided the vehicle is built in the United States. Eligibility phases out for taxpayers whose income exceeds $100,000 ($200,000 for couples). The provision expires at the end of 2028.
  • Increases the state and local tax (SALT) deduction cap. The bill raises the cap to $40,000 from $10,000 for filers earning less than $500,000. This was a critical provision for securing the votes of a small group of House Republicans representing high-tax states like California, New Jersey and New York.
  • Savings accounts for newborns. The bill gives all babies born between January 1, 2025, and December 31, 2028, a $1,000 savings account. Parents can add up to $5,000 a year until the child turns 18.
  • Increased tax on private foundations. The bill replaces the current flat 1.39% excise tax on the net investment income of private foundations with a tiered system. For foundations with assets under $50 million, the current rate will not change. It will rise to 2.78% for foundations with assets between $50 million and $250 million; 5% for foundations between $250 million and $5 billion; and 10% for foundations with assets above $5 billion.
  • Increased tax on college and university endowments. Creates a tiered system based on the size of the endowment on a per-student basis. The current tax rate of 1.4% could rise to as high as 21% for the largest endowments.
  • Ends green-energy tax credits. The bill winds down most of the tax credits that were approved by Congress in 2022 as part of the Inflation Reduction Act. The current $7,500 tax credit for the purchase of an electric vehicle, for example, would be eliminated for most vehicles at the end of 2025 and all vehicles at the end of 2026.
  • New tax on remittances. The bill proposes a 3.5% tax on remittances, applicable to any individual who is not a U.S. citizen or U.S. national and transfers cash overseas. While the provision is ostensibly targeting illegal immigrants who send cash to their home countries, there are concerns it could impact routine transactions by non-U.S. investors. Many industry observers believe that the tax only applies to remitters who are in the U.S. at the time of transfer. As the bill moves to the Senate, U.S. financial companies are working with trade associations to better understand the language of the bill, educate policymakers and protect the interests of international clients investing in the United States.