The Senate Finance Committee this week unveiled its proposed tax provisions for inclusion in the budget reconciliation bill currently under consideration in Congress.
The House of Representatives passed its version of the bill, H.R. 1, known as the One Big Beautiful Bill Act, in May.
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The Senate is now working on its own version, which must meet specific requirements to qualify for reconciliation. This would allow it to bypass the filibuster and pass with a simple majority vote, according to a report by the Journal of Accountancy. The goal? Passage by July 4.
Among the provisions for individuals in the Senate version of the bill that are different from the House version, several stand out.
Standard income tax deduction and Social Security tax relief
The Senate bill, like its House counterpart, would permanently establish the expanded standard deduction amounts enacted under the Tax Cuts and Jobs Act (TCJA).
Starting in tax year 2026, the standard deduction would be set at $16,000 for single filers, $24,000 for heads of household, and $32,000 for married couples filing jointly, with future adjustments for inflation.
Related: Social Security income tax deduction hits major roadblock
The Senate proposal also includes a temporary tax break for older Americans: a $6,000 deduction for individuals age 65 and older.
The House version offered only a $4,000 “senior bonus” deduction.
The Senate’s senior deduction would begin to phase out at a modified adjusted gross income (MAGI) of $75,000 for single filers and $150,000 for joint filers, and would apply from 2025 through 2028.
Tax expert Ted Sarenski notes that whether the additional senior deduction is $4,000 or $6,000, for joint filers with both spouses over 65, this would result in a standard deduction of $38,000 or $42,000 – amounts that exceed what the majority of seniors who currently itemize could reach, especially with the state and local tax (SALT) deduction capped at $10,000.
Related: How the IRS taxes Social Security income in retirement
However, Sarenski warns of potential challenges ahead:
“The bigger issue: come 2028 when this bonus is set to disappear, there will be tremendous squawking about a $8,000 or $12,000 drop in the standard deduction like we see now with proposed Medicaid cutbacks today which are merely trying to put Medicaid back where it was before COVID.”
State and Local Tax (SALT) deduction cap in flux
Under current law, the deduction for state and local taxes (SALT) is capped at $10,000.
The original House bill proposed raising that cap to $30,000, but a manager’s amendment increased it further – to $40,000 per household ($20,000 for married individuals filing separately), effective in 2025.
Related: SALT income tax deduction takes critical step forward
The Senate version, by contrast, would keep the SALT deduction cap at $10,000 and make that limit permanent.
It also includes provisions to prevent taxpayers from using workaround strategies to bypass the cap. However, this provision remains a point of negotiation between the chambers.
Senate Republicans, led by Majority Whip John Thune (R-S.D.), have signaled that the $10,000 cap is a negotiating position rather than a final offer, suggesting a compromise could land somewhere between the House and Senate proposals.
Still, members of the House SALT Caucus, including Rep. Mike Lawler (R-N.Y.), are holding firm on the $40,000 cap.
Lawler called the Senate proposal “DEAD ON ARRIVAL” and reiterated, “$40,000 is the deal – I will not accept a penny less.”
Sarenski emphasized that the SALT provision “is a concern for residents of high tax states like California, New York, Connecticut, etc.”
He anticipates that if the Senate moves to keep the cap at $10,000, “it may not pass the House,” and expects “there will be a compromise somewhere in the middle of those two figures.”
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Harold Eisenberg, the founder and CEO of WealthTec, takes a more critical view of the overall legislation, describing the One Big Beautiful Bill as “just not sound tax policy on many levels” with “too much politics in this proposed legislation.”
He characterizes the temporary senior tax break as “gimmicky,” though notes that this very quality “means some form of it likely passes.”
On the SALT deduction, Eisenberg argues that the limitation “is targeted primarily at taxpayers in Blue states, so on its face is discriminatory.”
Expert perspectives on legislative outlook
The prospects for these tax changes remain uncertain, with the legislative path forward depending heavily on House dynamics.
“The chances of any of these changes rests with the house,” said Sarenski. “The senators can pass whatever they agree on. The house is the issue with Republicans not voting in tandem.”
Tax professional George Papadopoulos takes a more cautious approach to predicting outcomes, noting his long experience with the legislative process:
“I have been around for a while and long enough to not really get into pending legislation matters. I know in general what is on the table and stay away from guessing what will actually be signed into law. When we actually have a law then it is time to get into analyzing it.”
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Despite his general reluctance to speculate, Papadopoulos does offer some measured predictions based on political realities.
He expects the $10,000 SALT deduction cap will increase “but not more than doubling,” suggesting a final figure well below the House’s proposed $40,000 limit.
He also anticipates “some form of senior deduction” will ultimately be included, driven by the political influence of older voters as “that voting block is so large.”
However, he expects the income thresholds for phasing out the senior deduction may be set higher than currently proposed.
Eisenberg, despite his self-described role as a “federal tax policy cynic,” also weighs in on the political dynamics. He believes that with the narrow House Republican majority, “keeping the SALT limitation at $10K would likely kill the bill in the house” because “too many Republicans in ‘swing districts’ in the Blue states are depending on raising that cap.”
Reflecting on the complex nature of tax legislation, Papadopoulos said: “Whoever said negotiating tax legislation is like making sausage was right.”
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