A new Republican-supported tax plan is advancing in the House, proposing sweeping changes that could affect the finances of millions of Americans. On Wednesday, the House Ways and Means Committee approved a bill that would make former President Donald Trump’s 2017 tax cuts permanent and introduce several new tax breaks.
Key Features of the Bill
1. Making the 2017 Tax Cuts Permanent
The bill would cement the tax brackets established under the 2017 Tax Cuts and Jobs Act. Without an extension, over 60% of taxpayers would see their taxes rise starting in 2026, according to the nonpartisan Tax Foundation.
2. Average $1,300 Tax Reduction
House Republicans estimate the bill would provide an average tax cut of $1,300 per filer. New breaks include some of Trump’s campaign promises, such as eliminating taxes on tips and overtime, along with targeted relief for seniors and families.
3. $4,000 Deduction for Seniors
Taxpayers 65 and older with incomes under $75,000 (or $150,000 for joint filers) would qualify for a new $4,000 deduction starting in 2025, available through 2028. This applies to both itemized and standard deductions.
4. No Tax Relief on Social Security
One key omission: the bill does not eliminate taxes on Social Security income — a promise Trump made on the campaign trail. Experts say doing so could risk the solvency of the Social Security trust fund.
5. Expanded Standard Deduction
From 2025 through 2028, the standard deduction would increase:
- Singles: $16,000 (up from $15,000)
- Heads of household: $24,000 (up from $22,500)
- Married couples: $32,000 (up from $30,000)
6. Bigger Child Tax Credit
The Child Tax Credit would be permanently set at $2,000 per child. Between 2025 and 2028, it would temporarily increase to $2,500 per child before returning to $2,000.
7. 1099-K Reporting Rule Repealed
The bill would scrap the controversial IRS rule requiring platforms like Venmo and PayPal to report users earning over $600. The previous threshold was $20,000 and 200 transactions.
8. Small Business Tax Break Grows
Pass-through businesses would see their deduction rise from 20% to 23% of qualified income, benefiting sole proprietors, partnerships, and S corporations.
9. No Taxes on Tips or Overtime (Temporarily)
Trump’s pledge to end taxes on tips and overtime would be implemented but only from 2025 to 2028. Workers in tipped positions and those earning OT would be able to deduct that income above the line.
10. Deductible Car Loan Interest
Taxpayers could deduct up to $10,000 in interest on U.S.-assembled vehicle loans. The benefit phases out for individuals earning above $100,000 or couples earning more than $200,000. This provision would also expire in 2028.
Political Divide and Budget Concerns
House Speaker Mike Johnson (R-LA) hopes to move the bill to the Senate by Memorial Day. Democrats strongly oppose the plan, criticizing proposed cuts to Medicaid and food assistance programs designed to help offset the cost of $880 billion in tax reductions.
Democrats also point out that some breaks benefiting working families are temporary, while tax relief for the wealthiest Americans is made permanent.
“This bill favors the top 1% while offering short-term gains for average workers,” said Rep. Don Beyer (D-VA), a member of the House Ways and Means Committee.
Final Outlook
While the bill still faces hurdles in the Senate and may undergo revisions, it outlines a bold new direction for federal tax policy that could shape American wallets for years to come.
