How the Senate GOP tax plan differs from the House bill

Zach HalaschakJune 16, 2025

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The article discusses the differences between the Senate GOP tax plan and the earlier House bill, released as part of the One Big Lovely Bill Act. The Senate Finance Committee’s version of the tax legislation includes key distinctions, reflecting ongoing negotiations to align both chambers’ priorities to secure enough GOP votes for approval.

Some notable differences include:

1. **SALT Cap**: The Senate proposes to keep the state and local tax deduction cap at $10,000 as a placeholder, while the House increased it to $40,000, creating contention among lawmakers.

2. **Child Tax Credit**: The Senate legislation establishes a permanent child tax credit of $2,200 that will be indexed to inflation, compared to the House’s temporary increase to $2,500 through 2028.

3. **Business Tax breaks**: The Senate bill makes certain tax breaks for business investments permanent,whereas the House bill only extends them temporarily.

4. **Tax on Endowments**: The Senate bill reduces the tax on large university endowments from 21% in the House bill to 8%, also excluding a tax hike on private foundation investment income.

5. **Limits on individual Tax Cuts**: The Senate includes restrictions on new individual tax breaks, such as limits on deductions for tips and overtime, which are not found in the House version.

6. **Clean Energy Credits**: The Senate proposes a slower phase-out of clean energy credits compared to the House.

7. **pass-through Businesses**: The Senate maintains the 20% deduction for pass-through businesses while the House proposes to increase it to 23%.

the Senate version emphasizes permanence in business tax measures, while some individual benefits remain limited and contentious as negotiations continue. Each chamber’s differing approaches highlight ongoing debates within the GOP over tax policy priorities.

How the Senate GOP tax plan differs from the House bill

The tax plan Senate Republicans released Monday as part of the One Big Beautiful Bill Act differs in several key ways from the House version that advanced last month.

The Senate Finance Committee released the much-anticipated text of the tax bill on Monday evening.

SALT cap left as a placeholder

The cap on state and local tax deductions has been perhaps the biggest and most controversial sticking point during negotiations on the legislation.

Republicans in high-tax blue states such as New York have been pushing to raise the $10,000 SALT cap and made it a campaign priority. The House-passed version of the legislation quadrupled the cap to $40,000. Republicans in the Senate want to see that pared back.

The Senate Finance Committee essentially punted on SALT for the time being. Instead of inserting a new SALT cap number, members pegged the SALT cap at $10,000 in their forthcoming legislation as a placeholder for negotiations over the contentious issue.

House “SALT caucus” members immediately pushed back on the placeholder inclusion, with some saying they are unwilling to budge on the $40,000 cap that House Speaker Mike Johnson (R-LA) successfully negotiated with them last month. The showdown over SALT will be a key issue to watch as the bill is debated in the Senate.

A smaller boost to the child tax credit

The Senate legislation bumps the child tax credit permanently to $2,200 and indexes it to inflation thereafter.

The House legislation, in comparison, raised the child tax credit to $2,500, but only through 2028. It would revert to $2,000 in 2029, although it would still be indexed to inflation after that.

Populist conservatives such as Vice President JD Vance and Sen. Josh Hawley (R-MO) have pushed for a bigger child tax credit, even as high as $5,000, so both versions of the legislation are likely a disappointment for them.

Business tax breaks are made permanent

The Senate bill makes several major tax breaks for business investment permanent.

The House bill extends those tax breaks, but only temporarily.

Specifically, the Senate bill would permanently allow companies to immediately deduct domestic research and development costs. It would also permanently allow full expensing for new capital investment, such as factory machinery, and would restore interest deductibility to help finance investments.

The business provisions are a key priority for lawmakers because incentives for businesses are thought to be especially helpful in boosting economic growth. In theory, they could help make the bill less costly to the Treasury, because with the increased growth comes increased revenue capture.

A smaller tax on university endowments and private foundations

The Senate legislation scales down a tax on large university endowments included in the House bill. The Senate version would tax universities with the highest student-adjusted endowments, for instance, Harvard University, at an 8% rate. The rate would be 21% in the House version of the bill, in line with the corporate tax rate.

The top rate is 1.4% under current law, set by the 2017 GOP tax overhaul.

Republicans have increasingly scrutinized universities in the fallout from the 2023 Hamas attack on Israel and the subsequent fallout and protests.

The Senate legislation also omits a tax hike on large private foundation investment income. In the House bill, the rate would be raised from 1.39% to as high as 10%.

Limits on Trump tax breaks on overtime, tips, Social Security, and auto loans

For the new tax breaks for individuals that Trump promised on the campaign trail, the Senate tax legislation includes limits that are not present in the House version.

No taxes on tips: The Senate legislation sets a $25,000 limit for deductions for income earned as tips. The deduction also phases out at a 10% rate starting at $150,000 in income for a single filer and $300,000 for a joint filer.
No taxes on overtime: The Senate legislation sets a $12,500 limit on deductions for overtime pay. The deduction phases out at a 10% rate starting at $150,000 for single filers and $300,000 for joint filers.
No tax on car loan interest: The Senate legislation sets a $10,000 limit on deductions for auto loan interest paid. The deduction phases out starting at $100,000 for single filers and $200,000 for joint filers. Also, the break is only available for new cars assembled in the United States.
No taxes on Social Security: The Senate version of the legislation provides a $6,000 deduction for seniors over the age of 65, a provision meant to fulfill Trump’s campaign promise to end taxes on Social Security benefits. That is larger than the similar deduction of $4,000 in the House version of the legislation. The Senate bill, though, phases out the deduction faster for single filers earning in excess of $75,000 or married couples earning more than $150,000.

Notably, in both versions, those provisions are temporary and will expire at the end of 2028.

Slower phase-outs for IRA clean energy credits

The Senate version of the bill includes a slower phase-out of clean energy credits than the House-passed version.

Specifically, it implements a slower phaseout of the Clean Electricity Production Credit and Clean Electricity Investment Credit for electricity generated by wind or solar technologies.

Both versions of the Republican tax legislation would roll back energy tax credits created or expanded by the 2022 Inflation Reduction Act. The IRA was a signature piece of legislation Democrats passed under former President Joe Biden.

No boost for ‘pass-through’ businesses

The Senate legislation does not include the enlarged tax break included in the House bill for businesses that file through the individual side of the tax code.

The House bill would raise the deduction for income earned by pass-throughs from 20%, which was set by the 2017 tax overhaul, to 23%. The Senate bill keeps it at 20%, although it makes it permanent. Under current law, it expires at the end of this year.

Republicans defend the tax break as a key pro-growth provision for the many small businesses that are organized as pass-throughs.

SENATE GOP MEGABILL WOULD DEFUND PLANNED PARENTHOOD

And more

Child and dependent tax credit boost: The Senate version of the legislation also provides a boost to the child and dependent care tax credit, known as the CDCTC. This is a provision that Sen. Katie Britt (R-AL) recently told the Washington Examiner that she was pushing for in reconciliation.
Tax breaks for more firearms: The House version of the bill removed silencers from the definition of “firearm” under the National Firearms Act and eliminated the transfer tax on silencers, but the Senate version goes even further and does the same for short-barreled rifles and shotguns.