As of this writing, the high-stakes One, Big, Beautiful tax bill has just cleared the Senate in a dramatic 51-50 vote, with Vice President JD Vance breaking the tie.
The legislation, which reflects key priorities of President Trump’s economic agenda, now heads back to the House for review, and potentially a final vote. If passed and signed in time for Trump’s preferred July 4 deadline, it would mark a major shift in tax policy with wide-reaching implications for individuals and businesses alike.
Here’s a breakdown of what’s in the bill, how it got here, and what business owners should start thinking about now.
Just weeks ago, this bill seemed stalled. The House had already passed its version, but the Senate remained divided, with several senators concerned about adding to the national deficit. Over the weekend, however, compromises were struck, ultimately leading to the bill's passage on July 1.
Despite earlier hesitation from so-called “deficit hawks,” the bill includes provisions that are projected to add an estimated $3 trillion to the national debt. It also raises the debt ceiling high enough that another debate on borrowing limits is unlikely to surface during Trump’s current term, barring a major emergency such as war or a pandemic.
So what prompted the shift? Political pressure likely played a role, with Trump pushing hard to get the bill passed in time for Independence Day. And as history shows, tough fiscal decisions often get kicked down the road. For now, the legislation moves forward, with major impacts for taxpayers and business owners.
One of the hotly debated components of the bill is the state and local tax (SALT) deduction cap. The House initially proposed raising the cap from $10,000 to $40,000 beginning in 2025. The Senate version ultimately agreed but limited this higher cap through 2029, after which a future administration will need to revisit the provision.
The bill also tackles long-promised changes related to taxes on overtime pay, tips, and Social Security income:
| Tips and Overtime | These are now exempt from federal income tax, with limits. The exemption applies to up to $25,000 in tips or overtime earnings, with phaseouts starting at $150,000 in total income. |
| Social Security | While the House had proposed a $4,000 deduction for recipients instead of fully removing the tax, the Senate increased that to $6,000. |
These changes offer relief to many working individuals, but they come with income-based thresholds and sunset provisions that will need to be monitored closely in future years.
This bill packs a lot of benefits for both large and small businesses. Here are the highlights:
In addition, small businesses with less than $31 million in gross receipts may be able to retroactively amend returns and claim refunds for R&D expenses from 2022 to 2024. Larger businesses, meanwhile, can opt to catch up on missed deductions all at once in 2025 or spread them over 2025 and 2026.
If the bill does get signed this week, business owners should be ready to act. Even though many provisions won’t take effect until 2025, some opportunities to amend prior returns or plan upcoming purchases will require advance action.
It’s also worth noting that the SALT workaround for pass-through entities remains intact, at least in the Senate’s version, offering additional tax planning options for flow-through business owners.
With more time before year-end than in typical late-December tax overhauls, businesses have a valuable window to plan effectively.
The legislation’s long-term impact, especially on the national deficit, will no doubt be debated well into the next administration. For now, though, it’s time to dig into the details.
Business owners should talk with their tax advisors soon to understand how the new provisions apply to their specific situation, particularly if they've invested in capital assets or research in recent years.
With a bill this expansive, there’s a lot to unpack. But one thing’s clear: this is one of the most impactful tax moves in recent memory, and the time to start preparing is now.
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