As lawmakers shape the next chapter of U.S. tax policy, notable differences have emerged between the House and Senate Finance Committee proposals. Financial professionals and investors should be aware of several key distinctions that could influence long-term planning:
1. Trump Accounts
Both chambers support the creation of tax-favored child accounts with a $1,000 government incentive. This shared provision highlights bipartisan support for encouraging early savings and investment among younger Americans.
2. Opportunity Zones
The House bill would eliminate existing Opportunity Zones (OZs) in 2026, while allowing new zones to be designated beginning in 2027. In contrast, the Senate would extend and enhance OZs permanently—indicating a fundamental difference in how each chamber views the long-term utility of these zones.
3. SALT Deduction
A major divergence appears around the State and Local Tax (SALT) deduction. The House proposes a $40,000 deduction for those earning under $500,000, with a phaseout thereafter. The Senate, meanwhile, retains the current $10,000 limit. The House approach would offer broader relief to upper-middle-income households.
4. Qualified Business Income (QBI) Deduction
The House supports a 23% deduction with a stricter phaseout for specified service trades or businesses (SSTBs). The Senate offers a slightly lower 20% deduction but with a more generous $400 baseline and a softer SSTB phase-in. The result: broader access under the Senate plan, higher deduction under the House version.
5. Pass-Through SALT (PTET) Workaround
The House would remove the PTET workaround election for SSTBs, while the Senate keeps the $10,000 SALT cap intact. Both indicate a potential shift away from state-based SALT deduction workarounds for pass-through entities.
6. Bonus Depreciation
The House proposes extending 100% bonus depreciation through 2029, whereas the Senate would make the 100% rate permanent—potentially providing greater certainty for long-term capital investment decisions.
7. Estate, Gift, and GSTT Exemptions
Both bills align here: a $15 million exemption (adjusted for inflation) for estate, gift, and generation-skipping transfer taxes. This consistency provides a level of predictability for estate planners, at least in the near term.
Source: Bob Keebler via the Academy of Preferred Financial Advisors