7 Takeaways from the Tax Bill Proposal

On Friday, the House of Representatives Ways and Means Committee introduced a draft of the Make American Families & Workers Thrive Again tax bill, which was replaced by a broader bill via amendment earlier this week.

At the time of writing, the bill had been approved by the committee with no substantive changes, with the goal of advancing the legislation to a final House vote by Memorial Day.

While the centerpiece of the bill is an extension of the Tax Cuts and Jobs Act (TCJA) of 2017, the proposed legislation contains several notable new provisions for individuals, businesses and families. Below, we discuss our key takeaways and guidance.

Indefinite Extension of Tax Cuts and Jobs Act Provisions

As expected, this bill codifies the provisions of the TCJA and thereby extends the current rules indefinitely. This includes individual income tax rates, the higher alternative minimum tax threshold, the limits on various deductions (such as mortgage interest, gambling losses, moving expenses and casualty losses), the elimination of miscellaneous itemized deductions, and the elimination of the personal exemption. The bill also repeals the “Pease Limitation,” which, before 2018, capped the amount of itemized deductions a taxpayer could claim.

Increased Estate, Gift and GST Exemption for 2026 and Beyond

The bill also increases the exemption for estate, gift and generation-skipping transfer taxes to $15 million for 2026, indexed for inflation after that year — more than a simple extension of current law.

Cap on Deductions for State and Local Taxes

A new provision is the increase in the cap on deductions for state and local taxes, the so-called “SALT Cap,” from $10,000 to $30,000 (married filing jointly or single), with a $15,000 cap for married taxpayers filing separately. Note, however, that the bill phases out this increased cap for taxpayers earning more than $400,000, with those earning $500,000 or more limited to the $10,000 cap.

Provisions Impacting Businesses and Business Owners

The bill renews several expired business tax provisions from the TCJA, including expensing certain research and development costs and bonus depreciation. It also contains enhanced credits for the cost of paid FMLA leave and employer-provided childcare.

Additionally, the bill extends and broadens the deduction for qualified business income (QBI); raises the deduction limit from 20% to 22%; and treats certain dividends from business development corporations as QBI. The bill also imposes new reporting obligations on employers related to proposed limitations of tax on tips and overtime pay.

Provisions on Foreign Tax

The proposed legislation increases the deductible percentages for GILTI (global intangible low tax income) and FDII (foreign derived intangible income) for corporations. Current rules for the BEAT (base erosion and anti-abuse tax) are extended, with additional taxes imposed on taxpayers subject to “unfair” foreign tax rates.

Provisions Impacting Charities and Foundations

The proposed legislation increases the tax on net investment income of foundations that hold more than $50 million, rising to 10% for those holding over $5 billion (the 1.39% rate remains for smaller foundations). Additionally, the excise tax on highly compensated employees is expanded.

The bill increases the tax on income earned by the endowments of private universities, based on the “endowment per student” calculation. The new rates range from 1.4% to 21% for institutions with the highest endowment per student. Royalties from name, image and logo licenses would be treated as unrelated business taxable income (UBTI).

Savings Accounts for Minors

A new concept in the bill is the “money account for growth and advancement” provision, or MAGA accounts. This allows taxpayers to contribute up to $5,000 per year to a trust account for a minor. The assets are not taxed while they remain in the account. Distributions for qualified purposes (education, purchasing a primary residence, or paying back an SBA loan) are taxed upon withdrawal at capital gains rates for amounts in excess of basis. The bill also contains a pilot program where parents of children born between 2025 and 2029 can receive a refundable credit from the Treasury department for $1,000 per child deposited directly into a MAGA account for that child.

Our Advice

Our advice is to stay the course. The proposal is primarily centered on the extension of current policies and is not yet law. Rates for individuals under this proposal remain unchanged, broadly negating pressure to accelerate income into 2025. Similarly, with the proposal to increase the estate, gift and GST exemption for 2026, taxpayers considering making taxable gifts are not facing a “use it or lose it” scenario this year. 

That said, taxpayers in states with relatively high state and local tax rates may consider accelerating income into 2025 and deferring deductions until future years if they anticipate they could potentially fall under the $400,000 income cap in order to receive the benefit of the proposed increased SALT deduction.

We will continue to monitor the bill through the legislative progress and communicate as warranted.