Don't Mess With Taxes

House Speaker Rep. Mike Johnson (R-Louisiana) on the phone as he and staff walk through the U.S. Capitol’s Statuary Hall. (Credit: Mike Johnson Facebook)

The Republicans’ consolidated measure to enact Donald J. Trump’s tax, immigration, energy, and more policies eked through the House early this morning.

The original Ways and Means Committee version of the legislation, dubbed the One Big Beautiful Bill (OBBB) per Trump’s not so subtle suggestion, was tweaked just enough this week to pass by a 215 to 214 vote.

Only two GOP members, Rep. Warren Davidson of Ohio and Thomas Massie of Kentucky, defected. The pair said they voted against the bill because it will add significantly to the federal deficit. Rep. Andy Harris, Maryland’s lone Republican representative, voted present “to move the bill along in the process for the President.”

The OBBB now goes to the Senate, where many members already have announced they plan to make changes.

While we wait for that next legislative step, here’s a look at some of the OBBB tax provisions that are in the House-approved bill.

SALT cap increase: Representatives who wanted an increase in the Tax Cuts and Jobs Act’s $10,000 cap on the itemized deduction for state and local taxes (SALT) were among the opponents of the original GOP OBBB.

As approved by the tax writing Ways and Means panel, the cap was bumped up to $30,000. Now it’s at $40,000 per household, and is effective retroactively to the start of 2025. That includes single and married filing jointly taxpayers; married taxpayers filing separate returns would have a $20,000 cap.

The deduction will be phased out for taxpayers with modified adjusted gross income (MAGI) of more than $500,000 ($250,000 for married taxpayers filing separately). That income level is $100,000 more than what was in the original OBBB.

The final version also calls for small, annual increases in the deductible amount and earnings limits. For tax years between 2026 and 2033, the $40,000 and $500,000 amounts would be increased by 1 percent each year.

One component from the original bill’s markup remains. The OBBB as passed prohibits specified service trades or businesses (SSTBs) from claiming SALT deductions, essentially gutting the many state passthrough entity taxes (PTETs) that were created in the TCJA’s wake as SALT cap workarounds.

Childhood savings accounts: New tax-favored savings accounts, originally named money account for growth and advancement, or MAGA, savings made it through the overnight OBBB debate unchanged as far as their requirements and implementation. You can read about that in my earlier MAGA savings post.

However, the plans were rechristened in the bill’s final version. They now are called Trump Accounts. Lawmakers didn’t provide any reason for the change, other than the apparent political genuflection to 47.

Alternative energy tax subsidies: While many in the GOP opposed the alternative energy tax breaks in the Biden administration’s Inflation Reduction Act, some supported the tax benefits that created alternative energy jobs in their districts.

Those lawmakers lose under the bill. The final OBBB offers major concessions to clean-energy opponents.

The House-approved measure speeds up the phaseout schedule of the Inflation Reduction Act’s tax credits for low-carbon electricity. Now to qualify, the construction of an eligible solar-, wind-, geothermal- or battery-powered production facility must start within 60 days of OBBB’s enactment. In addition, plants must be operating by the end of 2028.

There is, however, a carveout for advanced nuclear facilities. These energy facilities are exempt from the 60-day start-up requirement, and instead must only comply with the 2028 placed-in-service requirement.

OK, so your source of utility-provided energy will be affected. But what about changes you make to your home so that it's more energy-efficient? Make those residential changes soon, like by Dec. 31, 2025, soon.

The OBBB also would repeal the Energy Efficient Home Improvement Credit, which helped offset the costs of new air conditioning and heating units, windows and doors, insulation, and more. The Residential Clean Energy Credit, which covers solar electric panels, solar water heaters, wind turbines, and other home-based alternative energy sources, also is gone after 2025.

Electric, hybrid vehicles: What about the vehicle that you keep in your home’s garage? If you’re thinking of making it home to a new electric vehicle (EV), you better get to the dealership soon.

The OBBB calls for the end of many alternative vehicle tax subsidies by the by the end of this year.

The House-approved bill eliminates the $7,500 credit for most new EV purchases after Dec. 31, 2025. Eligible vehicles produced by automakers that have sold fewer than 200,000 tax credit-qualified cars will get one additional year of credits.

In addition to ending the new EV tax credit, the bill also terminates the $4,000 credit given on the purchase of used electric autos, as well as the $1,000 credit on the installation of Level 2 chargers.

And while the House Ways and Means Committee is in charge of taxes, a Transportation and Infrastructure Committee vehicular user fee proposal made it into the final OBBB.

EV owners would owe a $200 annual federal registration fees. The fee is $100 for hybrid vehicle owners.

Medicaid changes/cuts: More than 71 million lower-income Americans rely on Medicaid for their health insurance. Unless the Senate makes changes, that then are agreed to (again) by the House, many of these folks are going to face some changes to their coverage.

The OBBB calls for new work requirements in order to obtain Medicaid. The bill moved up the date the job provision would apply to December 2026.

The Congressional Budget Office estimates that more than 7 million are likely to become uninsured over the next decade under the OBBB changes.

Many more issues: In addition to the overall costs of OBBB, estimated to be almost $4 trillion before final changes were made early this morning, the House-approve measure also keeps a $4 trillion debt ceiling hike in place.

That’s a whole lot of dollars that Republican leaders were able to narrowly muscle past House deficit hawks. Will the same happened when Senate fiscal conservatives get their shot at the bill?

Any changes the Senate does make to the OBBB, such as inserting its no taxes on tips bill in place of the House version, must be reconsidered again by the House. Until both sides of Capitol Hill agree on all of the bill’s provisions, nothing is certain.

So, while it’s important to keep up with what’s being proposed as far as tax and other policy changes, as Maryland’s Harris mentioned at the top of this post, there’s still a long legislative process the OBBB must maneuver before any version of it becomes law.

You also might find these fiscal/OBBB items of interest:

• Senate unanimously passes No Tax on Tips bill
• GOP transportation bill calls for federal EV, hybrid fees
• Trump's FY26 budget seeks 23% cut in domestic programs
• House bills seek to ease tax burden of seniors and Social Security recipients
• 2nd W&M tax proposal includes popular, controversial, and costly provisions
• Green energy tax credits, including solar options, on the GOP tax bill chopping block
• GOP’s one big beautiful bill includes new MAGA savings account for newborns and young children

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