Tax Byte

Senate Finance Committee Revisions to OBBBA Pass in the Senate

Sharon Kreider, CPA & Mark Seid, EA, CPA, USTCP

The Senate passed their version of the One Big Beautiful Bill Act (OBBB) on July 1, 2025 with a 50 to 51 vote (the Vice President broke the tie). The Senate version of OBBB introduces significant modifications to the House bill. The House and the Senate have begun negotiations to reconcile their differences and plan on meeting the President’s deadline to have signature-ready legislation on his desk by July 4th. There are 100 tax provisions in OBBB. Here are the highlights of a few of the proposed changes.

Individual Tax Provisions: Key Changes from House Version

Child Tax Credit

Senate Version: Permanently increases the child tax credit to $2,200 per qualifying child
House Version: Temporarily increases the child tax credit to $2,500 per qualifying child

Child Tax Credit Social Security Number Requirements

Senate Version: For joint filers, only ONE spouse needs an SSN to claim the CTC
House Version: All taxpayers and spouses required to have SSNs
Impact: Senate approach significantly reduces the estimated 2 million children who would lose CTC eligibility

Standard Deduction

Senate Version: Includes permanent expansion of standard deduction included in TCJA
House Version: Includes temporary expansion of standard deduction included in TCJA

Enhanced Senior Tax Relief

Senate Version: $6,000 additional deduction for seniors (tax years 2025-2028)
House Version: $4,000 additional deduction for seniors (tax years 2025-2028)
Effective Dates: Both versions apply to same timeframe (2025-2028), no timing difference

No Tax on Tips

Senate Version: Similar to House with $25,000 cap phasing out at AGI over $150,000 ($300,000 joint)
House Version: Provides for an unlimited above-the-line deduction of qualified tips for tax years 2025 to 2028

No Tax on Overtime

Senate Version: 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% rate when AGI exceeds $150,000 ($300,000 for joint filers) – must be reported separately on Form W-2 (or Form 1099, if the worker is not an employee)
House Version: Makes overtime compensation deductible for the premium portion of overtime for itemizers and non-itemizers for tax years 2025 through 2028, excluding highly compensated employees and qualified tips

SALT Deduction

Senate Version: $40,000 cap for 2025 to 2029 (increased 1% per year) with phase down by 30% of MAGI above $500,000, but not below $10,000
House Version: Permanently increases the cap to $40,000 for all filing statuses (single, HOH, and MFJ) with income limits up to $250,000/$500,000
Client Advisory: High-income clients in NY, NJ, CA, and CT should prepare for some continued SALT limitations regardless of final outcome

Qualified Residence Interest

Senate Version: Makes $750,000 acquisition debt limit permanent – brings back mortgage insurance premiums as deductible interest
House Version: Makes $750,000 acquisition debt limit permanent

Vehicle Interest Deduction

Senate Version: Allow up to $10,000 deduction for auto loan interest on US-assembled vehicles for tax years 2025-2028 – phases out at a 20% rate when income exceeds $100,000 for single filers and $200,000 for joint filers
House Version: Allow up to $10,000 deduction for auto loan interest on US-assembled vehicles for tax years 2025-2028 – phases out by $200 for every $1,000 of income above $100,000 for single filers and $200,000 for joint filers

EV Tax Credit

Senate Version: $7,500 tax credit for new electric vehicles, $4,000 credit for used electric vehicles, and qualified commercial clean vehicle credit would all expire after September 30, 2025
House Version: $7,500 tax credit for new electric vehicles and the $4,000 credit for used electric vehicles would end Dec. 31, 2025 – automakers that sell fewer than 200,000 EVs could offer the credit for new vehicles until Dec. 31, 2026

Business Tax Provisions

Section 199A

Senate Version: Makes permanent the qualified business income deduction at 20%
House Version: Makes a permanent increase to the qualified business income deduction at 23%
Technical Changes: Technical amendments to phase-out remain

R&D Expensing Restoration

Senate Version: Makes R&D expensing permanent beginning in 2025 – the unamortized portion of domestic costs would be deductible in 2025 or 2025 and 2026 – small businesses could amend prior year returns
House Version: Temporary restoration (tax years 2025-2030 only)
Client Impact: Senate approach provides long-term planning certainty that businesses have demanded since 2022 §174 changes

Business Interest Deduction Enhancement

Senate Version: Permanent reinstatement of EBITDA-based limitation under Section 163(j)
- Client Benefit: Leveraged businesses gain permanent enhanced ability to deduct interest expense
- Technical: Senate permanently reverses the 2022 change from EBITDA to EBIT calculation
- RV Dealers: Trailers and campers towed by motor vehicles would be included in definition of “motor vehicle” for floor plan financing
House Version: Temporary EBITDA-based limitation restoration (tax years 2025-2029)

Bonus Depreciation

Senate Version: Makes 100% bonus depreciation permanent beginning for property placed in service after January 19, 2025 (including a new category for qualified production property)
House Version: Temporary restoration (tax years 2025-2030 only)

Client Impact: Provides certainty for capital-intensive client planning

Green Energy Tax Credit Phase-Outs

Critical for Renewable Energy Clients

The Senate version provides a more generous phase-out schedule for IRA tax credits:

Investment Tax Credit (ITC): Extended availability through more projects
Production Tax Credit (PTC): Slower wind-down than House version
Nuclear/Geothermal Credits: Significantly delayed cuts compared to House

Client Action Required: Energy clients should accelerate project development to capture credits before phase-out completion.

Bottom Line for Tax Professionals

The Senate’s version represents a more fiscally conservative approach on individual provisions while being significantly more generous to businesses through permanent (rather than temporary) extensions of critical provisions. The permanent restoration of R&D expensing and EBITDA-based interest deductions provides the long-term planning certainty that businesses have demanded since the 2022 tax changes.

Stay alert for rapid developments as House and Senate leadership work toward their July 4th deadline. The narrow Republican majority in both houses of Congress means a defection of one or two Republicans in the House or Senate could reshape the entire package.

This analysis is based on the legislative text released July 1, 2025. Tax professionals should monitor developments closely as negotiations continue.