First Republican tax proposals address expiring TCJA provisions

ARTICLE | May 12, 2025

Authored by RSM US LLP

Executive summary

Republicans on May 9 unveiled a package of proposed tax benefits for businesses and individuals, with additional proposals expected on May 13, as they put together their highly anticipated tax bill. Key proposals include increasing the qualified business income deduction to 22%, making permanent the Tax Cuts and Job Act’s personal income tax rates and brackets, and increasing the estate tax exemption to $15 million.

Notably absent were adjustments to the state and local tax deduction limitation (SALT cap) and favorable tax treatment for research and development, capital investments and business interest. Those matters could be addressed by additional proposals in the coming days. All proposals are subject to change as the legislative process continues.

Tax bill begins to take shape as Republicans release initial set of proposals

Republicans in the U.S. House of Representatives on May 9 released a package of proposed new and extended tax benefits for businesses and individuals. Many additional proposals are expected May 13 as the House Ways and Means Committee begins compiling a highly anticipated tax legislation package.

The first set of proposals would make permanent many provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) before they are scheduled to expire at the end of 2025. They propose an even more favorable tax rate for pass-through income, and to make permanent certain U.S. international tax rates for businesses and an elevated estate and gift tax exemption.

Notably absent from the first proposals were adjustments to the state and local tax deduction limitation (SALT cap) and more favorable tax treatment of expenses for research and development, capital investments and business interest. Those matters are expected to be part of the tax legislative process as it moves forward,

Although the proposals are subject to change as the budget reconciliation process continues in the weeks to come, taxpayers may work with their advisors to understand how the legislation would affect their tax obligations, cash flows, and business or wealth objectives.

Here is a rundown of key proposals for businesses and individuals released so far, and an overview of the tax policy road ahead.

Business taxation

Republicans’ initial release features some significant business tax proposals. Areas of focus and the corresponding proposals include:

• Pass-through businesses: Increase the qualified business income (QBI) deduction from 20% to 22%—and make it permanent, with restructured changes to the income limitations and thresholds. The proposal would also extend eligibility for the deduction to certain interest dividends paid by qualified business development companies.
• International taxation: Make permanent certain U.S. international tax rates—specifically, the global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII) and base erosion and anti-abuse tax (BEAT) rates

Individual taxation

The initial set of proposals would modify and make permanent several individual tax provisions that the TCJA established. Areas of focus and the corresponding tax proposals include:

• Personal income tax: Make permanent the tax rates and brackets enacted by the TCJA. Taxpayers in all brackets except the 37% bracket would be provided with a tax reduction through an inflation adjustment.
• Standard deduction: Make permanent the standard deduction enacted by the TCJA and increase it by $1,500 for 2025 through 2028.
• Personal exemptions: Eliminate personal exemptions.
• Alternative minimum tax (AMT): Make permanent the increased AMT exemption and phase-out thresholds.
• Child tax credit: Increase the child tax credit to $2,500 for 2025 through 2028; make permanent the additional child tax credit ($1,700 in 2025). After 2028, the child credit would revert to $2,000. To claim the child tax credit, the child’s social security number would have to be included in the tax return.

Estate taxation

The first set of proposals address estate tax provisions that were established by the TCJA and are scheduled to expire at the end of 2025.

• Estate planning: Increase the estate, gift, and generation-skipping tax exemption amounts to $15 million, adjusted for inflation, and make them permanent, compared to the TCJA's temporary $10 million exemption.

Other provisions in the first set of tax proposals

Republicans are proposing to make permanent the following provisions that were enacted by the TCJA:

• Limitations on mortgage interest deductions for mortgages exceeding $750,000 and home equity interest
• Limits on the deductibility of casualty losses
• Limits on the deductibility of miscellaneous itemized deduction
• Repeal of the overall limit on itemized deductions
• Repeal of the qualified bicycle commuting reimbursement rules
• Limitations on the exclusion and deduction of moving expenses
• Limitation on the deductibility of wagering losses
• Changes made to ABLE Accounts, and changes made with respect to rollovers from qualified tuition accounts and the savers credit.
• Rules for certain individuals performing services in the Sinai Peninsula are made permanent and enhanced to include other areas

They also propose restoring the exclusion for amounts from the discharge of a qualifying student loan on account of a student’s death or total and permanent disability.

Notable omissions from the first set of tax proposals

The first set of tax proposals did not address the following areas, many of which are expected to be addressed as part of the upcoming legislative process.

• Tax treatment of R&D costs, capital investments (bonus depreciation) and business interest expense
• SALT cap
• Corporate tax rate
• Tax rate for domestic manufacturers
• Carried interest
• Capital gains tax rate
• Taxation of tips, overtime pay or social security payments
• A higher tax rate for high income individuals
• Clean energy tax credits and incentives

What’s next for the tax bill

While the first set of tax proposals provides businesses and individuals with some insight into how Republicans may reshape the tax landscape, the process is in its early stages. The proposals released so far are subject to change as Republicans scrutinize these and other spending and taxation proposals and their estimated effect on the national debt.

House Republicans, with their narrow majority, have indicated they hope to approve the tax bill by Memorial Day, but the process could linger into June or beyond.

After House approval, the Senate will take up the legislation, and additional changes are anticipated. To become law, the House and the Senate need to approve an identical version of the bill. Senate Republicans hope to pass their version of the bill with a simple majority through the budget reconciliation process, which requires the legislation to meet strict budgetary and topical criteria. They have earmarked July 4 as their working deadline.

In the meantime, there remains considerable uncertainty about the scope of tax provisions in the final bill and the timing for potential enactment. Work with your tax advisor to stay up to date on legislative developments and to understand how proposals would affect your tax profile.