May 19, 2025

Draft 2025 Tax Bill Introduced with Potential Long-Term Impact

On May 9, 2025, the House Ways and Means Committee released the first details of a new tax bill, followed by a longer summary on May 12. It’s early in the process, and changes are expected, but the proposal offers a look at what Congress may be considering as several key tax provisions from the Tax Cuts and Jobs Act (TCJA) near expiration at the end of this year.

This is the beginning of the legislative process. The bill will move into markup, where members of the Committee can suggest revisions before voting on whether to advance it to the full House. If it passes the House, it will still need to go through the Senate, where more changes are likely. After that, it would go to the President for final approval.

Early estimates suggest the proposal would reduce federal tax revenue by about $4 trillion between 2025 and 2034. That’s before accounting for any growth effects. When those are factored in, the revenue loss is closer to $3.3 trillion. Supporters believe the bill could lead to a small increase in GDP (around 0.6%) which may help with job creation and wages. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.

Proposed Changes for Businesses

The draft bill includes several updates that affect businesses. Some are permanent, others temporary, but all are worth noting as they could impact planning for 2025 and beyond.

Qualified Business Income (QBI) Deduction: The Section 199A deduction for pass-through entities would increase from 20% to 23% and become permanent. The bill also reduces restrictions for certain service-based businesses currently subject to phase-outs.

Bonus Depreciation: Bonus depreciation would return to 100% for qualified property placed in service from 2025 through 2029. Without this change, the rate decreases to 40% in 2025 and then 20% in 2026.

Business Interest Deductions (Section 163(j)): The bill temporarily brings back the EBITDA-based formula for interest deductions, in place from 2025 to 2029. This approach allows more interest to be deducted compared to the current EBIT-based method and would especially benefit capital-heavy businesses.

Section 179: The cap on Section 179 expensing would increase, allowing more businesses to fully deduct the cost of equipment and software in the year it’s purchased. There’s also a proposal for 100% expensing of certain structures used in manufacturing, extraction, and agriculture, as long as construction begins before the end of 2028 and is completed on time.

R&D Expensing: Full expensing of domestic research and development costs would be allowed again from 2025 through 2029. Businesses that already started capitalizing R&D between 2022 and 2024 could recover those amounts in a “catch-up” provision.

Key Proposed Changes for Individuals 

For individuals, the bill aims to make several TCJA provisions permanent and introduces a handful of temporary measures.

• Tax Brackets: The current TCJA tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) would be locked in and continue to be adjusted for inflation.
• Standard Deduction: The nearly doubled standard deduction would remain in place. On top of that, a temporary “bonus” standard deduction would apply from 2025 through 2028 ($2,000 for joint filers, $1,500 for heads of household, and $1,000 for others).
• SALT Cap: The state and local tax (SALT) deduction cap would rise to $30,000, with a phase-down starting at $400,000 of income. The bill also addresses common workaround strategies used by partnerships and S corporations, such as pass-through entity tax (PTET) elections, likely phasing them out.
• Estate and Gift Tax: The basic exclusion amount would be permanently set at $15 million per individual up from $13.99 million, indexed for inflation starting after 2026.
• Temporary Relief Measures (2025–2028): The draft includes several short-term provisions for specific groups.
• Child Tax Credit: The credit would temporarily increase to $2,500 per child during this four-year period.
• Deduction for Seniors: Seniors would receive a higher standard deduction, with the extra amount phasing out at higher income levels.
• Tip Income Deduction: Workers in traditionally tipped occupations would be able to deduct 100% of their reported tips. 
• Overtime Pay Deduction: Some overtime wages would qualify for a deduction, with phaseouts based on income.
• Vehicle Loan Interest Deduction: Interest on auto loans could be deducted if the vehicle is assembled in the United States.

Changes to Green Energy and Related Credits

The bill would scale back many clean energy tax incentives passed in recent years. These include the Investment Tax Credit (ITC) for solar and wind projects, the Production Tax Credit (PTC), the Clean Electricity Production and Investment Credits, the Clean Hydrogen Credit, and the Nuclear Production Credit.

Most of these would begin to phase out by the early 2030s. The option to transfer unused credits to other taxpayers would end after 2027. In addition, credits for manufacturing renewable energy components, like solar panels and battery parts, would face shorter timelines. While a few clean fuel credits would stay in place, they’d apply under tighter rules. These changes could prompt energy companies and manufacturers to adjust their project plans.

What’s Next

This proposal is still in draft form, and much can change as it moves through Congress. Negotiations, especially around high-profile items like the SALT cap and energy credits, are expected. In the meantime, it’s worth keeping an eye on these developments. If you have questions about how any of the proposed changes could affect your business or personal tax situation, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.