Update: Trump's Beautiful Bill 2025 Tax Changes. What You Need To Know

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Current Status of Trump's Beautiful Bill

As of June 2025, the "One Big Beautiful Bill Act" has passed the Senate with a 51-50 vote, with Vice President JD Vance casting the tie-breaking vote. The bill is now headed back to the House of Representatives for final approval before it can be signed into law by President Trump.

The legislation aims to make permanent many of the tax cuts from Trump's first term while adding new tax breaks. According to the Congressional Budget Office, the bill would decrease federal revenues by about $4.5 trillion over the next decade while cutting spending by $1.2 trillion.

PERSONAL

1. Tax Free Tips

One of the biggest changes in the bill is the elimination of federal income tax on tips. If you work in a job where you receive tips—like restaurants, hotels, or hair salons—this could mean significant savings.

How it works: You won't have to pay federal income tax on tip income up to $25,000 per year. This means if you earn $30,000 in tips annually, you'll only pay taxes on $5,000 of that money.

Who benefits: This change helps service industry workers who rely heavily on tips, such as waiters, bartenders, hotel staff, and hairstylists. For someone earning $20,000 in tips annually, this could save thousands in taxes.

Time period: This tax break would be temporary, lasting from 2025 through 2028.

2. Enhanced Child Tax Credit

The Child Tax Credit helps families with qualifying dependent children by reducing their tax bill dollar-for-dollar. Trump's bill makes this benefit even better for many families.

How it works: The bill permanently increases the Child Tax Credit to $2,200 per qualifying child (up from $2,000). This amount would be adjusted for inflation starting in 2026.

Who benefits: Families with children under 17 years old. For a family with three qualifying children, this could mean an additional $600 in tax savings compared to the current credit.

Requirements: At least one parent must have a verifiable Social Security Number to claim the full credit for their children.

3. Overtime Pay

If you work extra hours for overtime pay, this change could put more money in your pocket by making some or all of that overtime tax-free.

How it works: The bill creates a tax deduction for overtime pay up to $12,500 for individuals and $25,000 for married couples filing jointly. This means you won't pay federal income tax on overtime earnings up to these amounts.

Income limits: The tax break begins to phase out once your earnings exceed $150,000 for individuals or $300,000 for joint filers.

Example: If you earn $8,000 in overtime pay during 2025 and your total income is under $150,000, you could deduct the entire $8,000 from your taxable income, potentially saving hundreds or thousands in taxes.

Time period: Like the tip tax exemption, this benefit would be temporary, lasting from 2025 through 2028.

4. Senior Bonus Deduction

Older Americans will receive a special tax break under the new bill, often called the "Senior Bonus."

How it works: Americans age 65 and older will receive an additional tax deduction of $6,000 per person.

Income limits: The full deduction is available to individuals with income up to $75,000 or married couples with income up to $150,000. The deduction gradually decreases for those with higher incomes.

Example: If you're 68 years old with an annual income of $60,000, you could deduct an additional $6,000 from your taxable income. If you're married and both over 65, you could potentially deduct $12,000 ($6,000 each).

Purpose: This provision was included instead of eliminating taxes on Social Security benefits, which was discussed but not included in the final bill.

BUSINESS

1. 100% Bonus Depreciation Reinstatement

The Bill reinstates 100% bonus depreciation for qualified property acquired and place in service between January 19, 2025, and January 1, 2030. This change allows small businesses to immediately deduct the FULL cost of qualifying assets in the year of purchase, rather than depreciating them over time. 

This can result in substantial tax savings, especially for businesses making significant investments in equipment, machinery, or other qualifying property. 

2. Optimizing the Increased QBI Deduction

The Big Beautiful Bill brings significant relief to small business owners through the enhanced Qualified Business Income (QBI) deduction. This crucial tax-saving strategy is particularly beneficial for pass-through entities, including sole proprietorships, partnerships, S corporations, and certain LLCs. By optimizing the QBI deduction, small business owners can significantly reduce their tax liability.

The QBI deduction has been increased from 20% to 23%, allowing eligible small business owners to exclude a larger portion of their qualified business income from taxation. This change directly translates to keeping more business income tax-free. For a small business with $100,000 in qualified business income, the increase represents an additional $3,000 that can be deducted, potentially saving hundreds or thousands in taxes depending on the owner's tax bracket.

3. Leveraging Enhanced R&D Tax Benefits

Enhanced R&D tax benefits under The Big Beautiful Bill offer small businesses a significant chance to reduce their tax burden. This legislation introduces substantial enhancements to R&D tax provisions, providing businesses with more flexibility and opportunities for tax savings.

The Big Beautiful Bill revises the current law regarding domestic R&D expenditures by offering taxpayers increased flexibility and choice. For domestic R&D expenses incurred in tax years beginning after December 31, 2024, and before January 1, 2030, taxpayers may now elect to (1) immediately deduct R&D costs in the year incurred, (2) capitalize and amortize costs over the useful life of the research (not less than 60 months), or (3) capitalize and amortize the costs over 10 years. This flexibility allows small businesses to choose the most advantageous method based on their specific financial situation, potentially leading to significant tax savings.

The Bill expands the definition of qualifying R&D activities to include a broader range of expenses, such as software development, certain types of engineering and design work, and process improvements. This expansion means that many operations routinely performed by small businesses can now be claimed as R&D activities, potentially qualifying them for valuable tax credits.

Frequently Asked Questions

Is Trump's Beautiful Bill finalized?

No, as of June 2025, the bill has passed the Senate but still needs final approval from the House of Representatives before President Trump can sign it into law. The House is expected to vote on the bill in early July 2025.

When do the tax changes take effect?

Most of the tax changes would take effect starting with the 2025 tax year (for returns filed in 2026). Some provisions are temporary and would expire after 2028, while others, like the Child Tax Credit increase, would be permanent.

Will these changes affect my 2024 tax return?

No, these changes would not affect the tax return you file in early 2025 for the 2024 tax year. They would first apply to your 2025 tax return, which you'll file in early 2026.

How much will these changes save the average taxpayer?

The impact varies widely depending on your income, family size, and specific situation. Middle-income families with children could see tax savings of several thousand dollars, while those who earn tips or significant overtime could see even larger benefits.

To learn more strategies for reducing your tax burden and maximizing your take-home pay check out Taxation Intel

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