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Big Beautiful Bill PASSES Senate — Here’s What It Means For YOUR Finances!
The BBB has officially passed the Senate with Vice President JD Vance officially casting the tie-breaking vote, and we’re breaking it down from a bunch of different angles, but in this article I want to talk about what it means for you.
And most importantly, for your pocketbook!
Does anyone still have a pocketbook?
Anyway, you get the idea….I want to talk about how this affects you, your taxes, how much new savings you might get, advantages for your business if you have them, etc.
And for that breakdown, I’m going to turn to Kevin “MeetKevin” Paffrath who does an excellent job when politics intersects with finance.
I’m going to give you two different formats, the video below or for those who prefer to just read things, a full transcript you can read.
And in between, I’ll give you a short bullet point summary of the most important things if you’re very short on time.
Enjoy:
Quick Summary:
Standard Deduction Increase: Goes up $750 for individuals, $1,500 for couples — with inflation adjustments. Estimated cost: $1.4 trillion.
Tax Brackets Maintained: Current (2017-era) income tax rates between 10–37% are extended. Avoids reverting to higher pre-2017 levels.
Child Tax Credit Slight Bump: Increased from $2,000 to $2,200 per child — smaller than the House’s proposed expansion.
No Tax on Overtime & Tips: Overtime pay and tips (even via credit card) would be tax-deductible for workers, not necessarily for employers.
Car Loan Interest Deduction: Interest on loans for Made in America cars becomes deductible — even for personal vehicles without side hustles.
State & Local Tax (SALT) Deduction Raised: Increased to $40,000 per household until 2030, then reverts to $10,000.
Estate Tax Exemption Doubled: Increased to $15M per individual or $30M per couple. Major win for wealthy households.
Business Expensing Restored: 100% bonus depreciation on equipment (retroactive to Jan 19, 2025). R&D costs fully deductible.
Work Requirements for Benefits: Medicaid and food stamps recipients must work 20+ hours/week unless disabled or raising kids under 14.
Clean Energy Cuts: EV tax credit ($7,500) expires early (Sept 30, 2025). Potential $250 annual EV fee still undecided in final version.
FULL TRANSCRIPT:
The Senate just passed the big beautiful bill, which means now it goes back to the House for reconciling some of the differences between the Senate and House version.
Uh in this, we’re going to cover some of the details of what is in the Senate version, how it affects you, uh how it affects markets broadly as well.
I’ll give you a quick spoiler on that. Markets probably have already priced in a lot of what is in this legislation since the expectation is very high that some form of the big beautiful bill will pass.
Uh and I don’t think markets are expecting tax rates to revert to what they would in 2017 should this bill not pass.
So in other words, there’s just significant downside should this not pass. But we do expect it to pass marketwise.
Now what’s in the Senate bill for you?
Well, the standard deduction is going to go up $750 for everyone. Keep in mind this still has to get approved by the House.
Uh and goes up $1,500 for couples and now includes inflation adjustments.
This one change alone is expected to cost about $1.4 trillion.
Keep in mind the total cost of the bill is expected to be somewhere around $4.4 trillion with an additional about maybe 1.2ish twoish of revenues coming in…
…making the total cost of the bill as projected by the Congressional Budget Office over the next 10 years somewhere around $3.2 2 trillion…
…which is somewhat similar to some of the early stimulus packages that we saw during co.
Uh now of course a lot of people especially on Fox News are saying oh but the CBO is always wrong with their estimates…
…but what they’re doing is they’re taking 2017 estimates, ignoring any of the effects or inflation on revenues or expenses after 2020 and 2021 and saying ah see the CBO those estimates in 2017 were wrong.
Well, no duh. We hit COVID and a lot of numbers changed. We had a whole heck of a lot of inflation.
So, anyway, that said, yeah, it is a bill that adds to the deficit and it’s one of the reasons that Elon Musk is frustrated about growing deficits in the country.
However, it does deficit spend by providing tax breaks to some people, in this case, everyone, in the form of the standard deduction.
Regarding the alternative minimum tax for those of you who pay that, there is a permanent increase in the AMT exemption.
So basically lower chance of you hitting the AMT for writing off uh itemized deductions.
The child tax credit is going to move from 2000 to 2.2,000 with one parent required to have a social security number.
It’s only a modest increase compared to what we saw uh in the House which was going for a bigger increase in that child tax credit.
Tax brackets would be kept at their current levels which are like their 2017 levels of between 10 to 37%.
Without this extension, we would revert back to 2016 levels of between 10 to 39.6% with each bracket in between going up a bit.
We’ve got no tax on overtime and tips.
Now, the definition of cash tips from the IRS actually includes credit cards.
So, when we see the IRS phrase cash tips, it does ironically include credit cards because the phrasiology doesn’t match.
But when you look up what the definition of a cash tip is on the IRS website, that’s what you get.
Uh, and you also get a car interest deduction for any made in America vehicle and a loan that you get.
So, if you buy a car, it’s made in America, and you get a loan on it, you get to write off your interest as if it’s a business expense.
Of course, many people with side hustles already do that anyway.
Uh so this would really only affect people without a side hustle who buy a car that’s used personally.
Uh and now you could write off the interest on those personal loans essentially for your personal car.
The uh salt deduction, state and local tax deduction would be increased.
Uh so on your federal tax return, you would be able to write off up to $40,000 of state and local taxes that you pay.
So if you pay $40,000, you’d be able to write that off in your federal taxes.
Uh that uh a $40,000 limit per household would revert back to $10,000 in 2030.
Donald Trump is also increasing a larger deduction for seniors.
This is different than no tax on social security.
Uh it basically just gives seniors a $6,000 larger standard deduction than non seniors and only between 2025 and 2028.
For wealthier households, the estate tax uh exemption has been increased to $15 million of a lifetime limit for gift taxes and estate taxes.
Uh exemptions up to $15 million for an individual, $30 million for a joint household.
That’s expected to cost $212 billion as part of the bill.
Uh worth noting that the tax bracket increase is expected to cost about $2.1 trillion.
So, some of the big numbers are coming from some of these increases and standard deductions.
Business cuts, bonus depreciation through 179 expensing, that is 100% deductions for capital equipment, uh will apply starting retroactively on January 19th, 2025 for qualified property purchased on or after January 19th, 2025.
So you can count this retroactive deduction.
Uh and then of course going forward, this means we’re likely to see aircraft deductions again.
So, should you go buy a plane, rather than taking an accelerated bonus depreciation of 50% now or 40% or back to sort of normal deductions, you’re able to go back to 100% expensing…
…which could be good for not only machinery or aircraft or maybe even companies installing their own GPU farms.
Who knows? Maybe it’s good for Nvidia.
That’s expected to cost $363 billion.
Then we’re looking at R&D expensing, full expensing of domestic research and uh development expenses beginning with the 2025 tax year.
This is good for businesses spending more money on research and development.
And usually this works is the benefit you get applies to the increase in the amount of R&D spending you spend on each year.
Uh, so uh, in other words, if one year you were spending no money on R&D or the last few years you spent no money on R&D…
…and all of a sudden now you’re spending money on R&D, which could just be expenses for building an app or some kind of new technology, you get to fully expense that.
They’re making the 20% qualified business deduction permanent for those pass through entities like escorps or LLC’s.
They are also uh in this is more of a a drawback, but uh they’re taking they’re they’re allowing individuals who take business deductions more than their income uh to take fewer of those losses forward.
Be 262,000 losses for single or 524 for joint.
On immigration, there’s uh there’s some funding for immigration enforcement in the military in here.
They’re also including work requirements for Medicaid and food stamp.
This for food stamps. This is where Donald Trump says we’re just trying to remove waste, fraud, and abuse.
Basically saying, hey, like if you’re not even trying to work to sustain your own household, then that’s waste, fraud, and abuse.
Uh this would be or or would contain a 20-hour work week requirement if you have no children under 14 or you are not disabled.
It’s possible that 11 million could lose coverage here.
Donald Trump thinks that number is going to be a lot lower.
Of course, a lot of people looking at this and saying, “Hey, we support work requirements if you’re looking for the social safety net of Medicaid or food stamps.”
Anyway, uh clean energy cuts are obviously included with this with potentially a $250 tax for electric vehicles since they don’t uh pay for a gasoline tax.
And this would also include cuts to heat pumps, solar battery manufacturing credits, battery tax credits for buying batteries…
…rooftop uh solar tax credit cuts, clean energy cuts, including wind cuts, and then of course that electric vehicle cut…
…which is um uh which is sadly that $7,500 EV tax credit uh expiration that the Senate is looking to uh expedite.
So, this gives us a little bit of an idea. This would be September 30th, by the way.
So, uh it would end on or before September 30th. If you buy a car on or before September 30th, you could still get that $7,500.
Does create a little bit of a short-term catalyst for Tesla, by the way, between now and September 30th, which is uh the end of Q3.
So, in Q4, you would not have that $7,500 tax credit anymore, ending that tax credit one quarter sooner than expected.
Now, uh, keep in mind also that the all of this still has to be, uh, passed by the House.
Donald Trump is hoping that the House will just slam dunk it over the next 3 days.
I think it’ll take a little bit longer. I do think the bill will end up getting passed.
Uh, but we’ll see what kind of negotiations and sort of the last minute moves occur.
Also noting that Elon Musk is pretty frustrated with the increase in deficits.
Uh and actually verbally says that he’s cheering the removal of tax credits because they would help lower the deficit.
A lot of people looking at this and saying, “Hey, Elon’s right. We should be focused on the debt.”
But then people on the same token are also saying, “Hey, but I also like the tax breaks.”
So, kind of classic political situation that we’re in.
As far as the $250 fee, there’s also to be determined if that $250 fee would actually end up going through in the House version.
So, that’s something uh that um we’ll see if it makes it in, but uh we’ll see that that is still up in the air and it’s entirely unclear if that $250 electric fee will be included or not.
Trying to get a little bit of an update on this, but I can’t seem to get an update on that $250 fee.
So, we’ll get to the bottom of that.
Uh, but anyway, that gives us a little bit on the rest.
Yeah. So, House bill had the $250. Senate, multiple proposals were going back and forth as to whether or not they would actually be included.
We’ll see when we get to the final version, but if that’s included, it would be some form of annual fee that would probably show up on your tax return.
And it’s a $250 fee for electric vehicles annually and $100 fee for hybrids and no fee for gasoline cars…
…since when you go fill up gas, you’re paying a little bit every single time for those road taxes.
So, we’ll see what happens there.
Let’s see what some of the comments are that you have here. We’ve got what benefits for future business owners not paying for overtime tax on their employees.
Uh yeah, that’s interesting because I mean basically what you know what you’re saying is hey are you going to have to pay like your you know social security taxes on those overtime wages FICA taxes and all that.
Yeah, that’s interesting. Let’s look at that.
Uh let’s pull up Senate Bill overtime text.
So you really have to look at the text inside the overtime provisions in the big beautiful bill.
Provides deductions to eliminate income taxes on certain tips and overtime pay.
So if they’re deductions then it might mean you still as a business owner have to pay taxes uh based on the hours and wages that are paid to your employees.
So, you’re still paying uh like the unemployment insurance uh and other taxes.
Uh but the employee would then get some kind of deduction to offset that extra uh sort of time and a half that they’re being paid or two times uh pay that they’re receiving to offset some of that extra tax.
So, that’s interesting. It it wouldn’t actually really help a business owner in that case.
It would be more for the individual.
That’s very interesting. Yeah, that’s a that’s a great question.
So, when is the last day to get a solar discount?
Can you explain the write off on loan interest that would count for the current loan?
I don’t think it applies to current loans. I think it would only be new cars bought that are made in America.
So, the idea is to incentivize the local manufacturing uh you know or domestic US manufacturing infrastructure.
But as far as uh the last day to get solar residential effici—
Okay, here we go. The following expir—
Yeah, this is why it’s so complicated.
Here’s why it’s so complicated is because of the credit dates are all over the place.
Clean vehicle tax credit expires September 30th, 2025.
Alternative fuel vehicle refueling credit, June 30th.
Efficient energy home improvement tax credits December 31st.
So, solar panels and batteries presumably would be the December 31st deadline.
Commercial clean vehicle tax credit September 30th.
Yeah. Again, energy home improvement end of the year.
So, I wonder if that’s a little bit of an Elon Musk stab right there that they moved up the vehicle write off uh expiration but not or tax credit but not the solar tax credit.
That’s quite interesting.
So, as a correction, it looks like the House version has the $250 for electric vehicles and $100 for hybrids.
The Senate version does not include that fee.
However, this could be a topic that ends up going back and forth between the House and the Senate where we end up seeing some kind of fee.
We’ll have to pay attention to this as the House gets back to work and tries to reconcile this.
Uh, and as they make these changes, both chambers have to ultimately approve the bill before it gets sent to the president.
So, this gives us a rough idea of what’s going back to the House right now, and then we’ll keep an eye on some of the changes.
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