Rep. Jason Smith, R-Mo., discusses the latest objections to President Donald Trumps tax bill on Making Money.
Senate Republicans have introduced their chamber’s version of the GOP’s tax cuts and extensions package, as Congress looks to deliver on President Donald Trump’s “One Big, Beautiful Bill” before the Fourth of July.
The GOP majority on the Senate Finance Committee released a draft of its portion of the reconciliation legislation that the upper chamber is expected to consider in full in the near future.
It aims to prevent an over $4 trillion tax hike from occurring at the end of this year, when the temporary tax cuts in the Tax Cuts and Jobs Act (TCJA) of 2017 are set to expire.
Here’s a look at how the Senate’s version of the package impacts some of the tax policies that affect most American taxpayers and households:
GOLDMAN SACHS: WEALTHY AMERICANS TO CONTINUE EXODUS FROM HIGH-TAX STATES EVEN WITH HIGHER SALT DEDUCTION
Senate Republicans released their version of the GOP tax bill. (Getty Images)
Tax Rates
The Senate bill would make the TCJA’s lower tax rates and brackets permanent, rather than making them temporary, as was done in the original TCJA, to comply with budget reconciliation rules that limit a bill’s impact on budget deficits beyond a 10-year budget window.
Under the bill, the brackets would remain at 10%, 12%, 22%, 24%, 32%, 35% and 37%, in order of lowest to highest. If the TCJA’s lower brackets were allowed to expire, most of those brackets would be slightly higher at 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%, respectively.
WILL PRESSURE FROM TRUMP AND VANCE SPUR POWELL TO CUT INTEREST RATES?
Standard Deduction
Most taxpayers elect to use the standard deduction rather than itemizing their tax return – something roughly 10% of taxpayers have done in recent years.
The TCJA roughly doubled the standard deduction and for tax year 2025 it’s set at $15,000 for single filers and $30,000 for married taxpayers.
Under the Senate bill, the standard deduction would rise to $16,000 for single filers and $32,000 for married filers in the 2026 tax year, then be adjusted for inflation in ensuing years.
Workers who customarily receive tips would be able to deduct up to $25,000 in tips per year. (Tuscan Brands / Fox News)
No Tax on Tips
The GOP tax package would create a new deduction of up to $25,000 for qualified tips received by an individual who works in a role that customarily and regularly receives tips. It would be available to employees who receive a W-2 as well as independent contractors who receive a 1099 form.
Both itemizers and non-itemizers would be able to claim the deduction, which phases out for taxpayers whose modified adjusted gross income exceeds $150,000 for an individual or $300,000 for a joint tax return. The no tax on tips deduction would be permitted for tax years 2025 to 2028, meaning it wouldn’t be permanent and would require a future extension beyond the 2028 tax year.
WHITE HOUSE TOUTS PLAN TO PROVIDE $1K INVESTMENT ACCOUNTS FOR NEWBORNS
No Tax on Overtime
The GOP bill would create a new deduction of up to $12,500 for qualified overtime compensation. The deduction phases out for taxpayers whose modified adjusted gross income exceeds $150,000 for an individual or $300,000 for a joint tax return.
Additionally, the overtime deduction would only apply if the amount of qualified overtime compensation is reported separately on the taxpayer’s W-2 form.
Much like the no tax on tips provision, the overtime deduction would be available for tax years 2025 to 2028, barring a future extension.
The bill would allow taxpayers to deduct interest on certain auto loans. (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
No Tax on Car Loan Interest
The “Big, Beautiful Bill” would also create a new deduction of up to $10,000 for qualified passenger vehicle loan interest in a given taxable year. The deduction would phase out when a taxpayer’s modified adjusted gross income exceeds $100,000.
Applicable passenger vehicles include cars, trucks, vans, SUVs and motorcycles that have been manufactured for use on public streets, roads and freeways; and for which the final assembly occurs in the U.S. The bill defines the final assembly as the process by which the manufacturer produces a vehicle and delivers it to a dealer with all the parts necessary for operation.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
As is the case with the overtime and tips deductions, the auto loan provision would be in effect for tax years 2025 through 2028.