Five Surprising Changes to Know in the 2025 Senate Tax Bill

28 5 minutes read

Since the U.S. Senate has unveiled its version of the GOP’s “Big Beautiful Bill,” several key changes have emerged that set it apart from the U.S. House of Representatives’ earlier proposal.

These differences, some of which are surprising, are already fueling debate in Washington and could have wide-reaching effects for families, businesses, and even nonprofit organizations.

And…it’s worth noting that these proposals come as new polling from PEW Research suggests many U.S. taxpayers have doubts about the bill, with 54% of respondents saying the mega legislation will have a mostly negative effect.

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Senate tax bill proposals

Like the House version of Trump’s One Big Beautiful Bill Act, the Senate’s proposed bill proposes several tax changes and policy shifts that could impact taxpayers for years to come.

Some of the proposed Senate changes are somewhat surprising, from a more modest child tax credit increase to a larger charitable deduction and timing changes for some energy policy provisions.

These proposals set the stage for tough negotiations with the House as the massive reconciliation bill progresses through the legislative process in Congress.

Based on the latest legislative text, here are five key changes proposed in the Senate tax bill.

1. More modest Child Tax Credit — and sharper Medicaid cuts

The federal child tax credit is one closely watched provision when it comes to tax reform. While Republicans in both chambers have proposed increasing the credit, the Senate’s version is notably less generous than the House’s.

According to a draft of the Senate bill, the maximum child tax credit would be set at $2,200 per child starting in 2025, with adjustments for inflation after.
By contrast, the House bill would raise the credit to $2,500 per child for four years before reverting to $2,000, also indexed for inflation.

Some policy analysts note that many children could be left out, since neither version offers relief to families with low incomes who owe no federal income tax.

However, the Senate’s decision to opt for a lower amount is a notable policy choice since past expansions of the CTC have been credited with reducing child poverty.

The Senate’s tax bill also would hit Medicaid harder than the House version, with a combination of deeper funding reductions and stricter eligibility policies.

The Senate proposal would slash federal Medicaid support by billions more than the House bill, with particularly steep impacts on states that expanded Medicaid under the Affordable Care Act (ACA).

These cuts would largely be achieved by targeting a common state financing strategy: provider taxes.
The Senate plan would gradually lower the allowable provider tax rate from 6% to 3.5% for states that expanded Medicaid, a move some argue could leave major gaps in state budgets.

Some health policy experts warn that these and other changes could result in millions more Americans losing Medicaid, especially among families with lower incomes and those in rural areas.

2. Permanent business tax breaks and a lower cap on State and Local Tax (SALT) deductions

The Senate proposes to make certain business-related tax breaks permanent — an approach that contrasts with the House’s temporary extensions.

That includes provisions like 100% bonus depreciation and expanded deductions for business interest, which are popular with industry groups but add to the long-term cost of the already expensive “big bill.”

At the same time, the Senate version currently maintains a $10,000 cap on federal deductions for state and local taxes (SALT), far lower than the $40,000 cap included in the House GOP version of the bill.

Some see this move as a placeholder for negotiation. Still, it has already triggered backlash from some House Republicans representing high-tax states, whose constituents would benefit from a higher SALT cap.

3. Larger above-the-line charitable deduction for non-itemizers

In an unexpected shift, the Senate bill expands the above-the-line charitable deduction for taxpayers who don’t itemize.

The House bill would allow a deduction of up to $150 for individuals and $300 for married couples.
The Senate proposal, however, would increase that to $1,000 for individuals and $2,000 for married couples.

Some nonprofit advocates have advocated for expanded tax incentives to boost donations at a time when many charitable organizations are facing financial stress. However, some policy analysts say the “big bill” provisions complicate charitable giving rules.

4. A larger tax deduction for older adults

As Kiplinger has reported, the Senate bill would temporarily add a $6,000 special bonus tax deduction for those 65 and older, more than the $4,000 proposed in the House version.

This deduction would be available to itemizers and those taking the standard deduction, would stack on top of the existing extra standard deduction for those 65 and older, and begin to phase out at incomes above $75,000 for individuals or $150,000 for couples.

GOP lawmakers say the change is designed to help older taxpayers manage rising living costs.

For more information, see Senate Seeks $6,000 Bonus Tax Deduction for Those Age 65 and Older.

5. Rollback of clean energy credits — with some flexibility

Both the House and Senate bills propose rolling back many of the clean energy tax credits enacted under President Biden’s Inflation Reduction Act (IRA).

However, the Senate version would phase out incentives for wind and solar energy at a slower pace than the House, allowing more projects to qualify before the credits expire.
The Senate bill would also preserve some incentives for geothermal, nuclear, and hydropower projects.

According to an NPR report, this compromise is already eliciting mixed reactions from industry groups and environmental advocates.

The One Big Beautiful Bill Act in the Senate: Bottom line

Overall, the House and Senate versions of the “Big Beautiful Bill” share broad goals like making most Trump-era tax cuts permanent, cutting non-military spending, and boosting border and defense funding. Still, the proposals differ in some key aspects.

As mentioned, the House bill features larger, temporary tax breaks, like a higher child tax credit and a more generous SALT deduction. It would also allow more in temporary deductions for tips and overtime pay.

In contrast, the Senate bill opts for smaller, permanent tax cuts, keeps the SALT deduction capped at $10,000, and would limit tip and overtime deductions.

Regarding Medicaid, the Senate would impose deeper funding cuts and stricter eligibility rules.

Some estimates project the House bill could add anywhere from $3.8 trillion to $5.3 trillion to the deficit over a decade, while the Senate version, with more permanent provisions and a slower phase-out of green energy credits, could potentially cost even more.

Also, the House would raise the debt ceiling by $4 trillion, whereas the Senate proposes a $5 trillion increase.

But stay tuned as GOP lawmakers in both chambers work toward a final version of Trump’s big reconciliation bill, which they say they still hope to pass by July 4.

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