What’s in the Trump tax bill that just passed the Senate

President Donald Trump’s multitrillion-dollar tax and spending package moved closer to reality after it passed the Senate Tuesday.

Republican senators altered an earlier version approved by the House to make deeper cuts to safety-net programs such as the Medicaid health insurance for the poor and disabled. The Senate bill also would speed up elimination of clean energy tax breaks.

Businesses benefit from Senate changes that would make permanent a series of breaks that had been offered only temporarily in a House version, as well as a more generous break for companies in high-tax states.

The president’s signature economic legislation would extend expiring tax cuts for businesses and individuals initially passed in 2017 and add temporary new breaks for tipped and overtime workers, the elderly and car-buyers who take out loans. It provides hundreds of billions of dollars in new funding for defense and for Trump’s immigration crackdown.

The House plans to vote on the bill Wednesday as Republicans rush to complete work on the legislation by a July 4 deadline Trump set.

Here’s a breakdown of key provisions in the latest version of Trump’s tax bill:

State and local tax deduction

The Senate legislation incorporates a deal to raise the limit on the state and local tax deduction to $40,000 annually for a five-year period. The write-off would phase out for taxpayers who make more than $500,000 per year. After the five-year period, the limit would snap back to the current $10,000 limit imposed in the 2017 tax law.

The higher limit was demanded by Republican House members who represent states with high taxes such as New York, California and New Jersey. One key holdout wasn’t satisfied: New York’s Nick LaLota. He wants the higher limit maintained for at least 10 years and said he will vote against the legislation in the House as a result.

The Senate also dropped new limits House Republicans had put on pass-through businesses’ deductions of state and local tax taxes. Some business owners don’t need to abide by the SALT cap that applies to everyone else, thanks to legal workarounds approved by legislatures in New York, New Jersey, Connecticut, California and dozens of other states.

No tax on tips

Workers would be exempt from taxes on tip income up to $25,000 per individual, as well as overtime up to $12,500 per individual and $25,000 per couple. The tax breaks run through 2028. Those deductions start to phase out at $150,000 in income per person.

Medicaid

Spending on Medicaid health insurance would be cut by nearly $1 trillion over 10 years, and 11.8 million Americans would lose health insurance, according to an analysis by the nonpartisan Congressional Budget Office that doesn’t include last-minute adjustments

The measure would put a new limit on a mechanism nearly all states use to increase federal Medicaid funding. The legislation would cap so-called provider taxes that states use toward defraying their Medicaid matching fund requirements, allowing them to bring in more federal money to make Medicaid payments to providers and expand coverage.

The cap would be phased in beginning in 2028 for states that expanded Medicaid coverage for low-income people under the Affordable Care Act. According to the nonpartisan health policy research group KFF, 40 states and the District of Columbia have done so.

The measure would create new work requirements for Medicaid recipients, unless they are elderly, disabled or have children under 14 years old. Medicaid beneficiaries who gained eligibility through the Affordable Care Act would have to pay a share of costs through charges like co-pays.

Rural hospital fund

The Senate added a $50 billion rural hospital fund, an effort to mitigate the impact of Medicaid cuts on those institutions. Rural lawmakers raised concerns the Medicaid cuts would force local hospitals to close.

Clean Energy

GOP senators fast-tracked a phase-out of green energy tax credits, including wind and solar power. The revised bill would require wind and solar projects to be in service by the end of 2027 to receive the tax break, a shift from a more lenient previous version that required projects to be under construction by that date to receive at least partial credit. The Senate-passed measure also did away with a planned excise tax on wind and solar projects that use a certain threshold of Chinese components, a blow to American manufacturers.

Electric vehicles

A popular $7,500 tax credit for consumer purchases of new and used electric vehicles would end on Sept. 30, 2025, earlier than previous versions of the bill that would have eliminated the credit at the end of the year.

Auto loan tax deduction

A deduction up to $10,000 would be established for interest payments on auto loans from 2025 through 2028. The tax break is only eligible for new vehicles whose final assembly is in the US.

Permanent business tax breaks

Three business tax deductions would be made permanent. That includes the ability to use depreciation and amortization as the basis for interest expensing, the research and development write-off and a 100% bonus depreciation of certain property, including most machinery and factories. It’s a win for banks, who could see a surge in lending as companies have more cash freed up to invest in projects.

Semiconductors

An investment credit for semiconductor manufacturers would be increased to 35% from 25%, giving chipmakers more incentive to break ground on new facilities by an existing 2026 deadline.

Child tax credit

The maximum child tax credit would rise to $2,200 from $2,000 per child. It also would be made permanent and adjusted for inflation.

Trump child accounts

Parents, relatives and others would be able to contribute up to $5,000 in total annually to tax-deferred “Trump” investment accounts for children until they turn 18. 

Children who are U.S. citizens born from 2025 through 2028—essentially, during Trump’s current term—would get a $1,000 contribution into their accounts from the federal government.

Endowment tax

The current 1.4% tax on net investment income of private college and university endowments would go up for better-funded institutions. The new tiered tax rate structure would climb as high as 8% for colleges with the most endowment income per student.

Consumer protection

The funding cap for the Consumer Financial Protection Bureau would be cut almost in half to 6.5% of total operating expenses of the Federal Reserve System. It would slash resources for an institution established to combat abuses such as deceptive and predatory lending practices exposed by the 2008 financial crisis.

Food aid

Food assistance for low-income Americans would be cut by expanding existing work requirements for federal food stamps to cover beneficiaries up to 65 years old. The Supplemental Nutrition Assistance Program or SNAP, as the program is known, currently only requires work documentation for recipients up to 60 years old.

New cost-sharing requirements also would require states to cover a portion of food stamp benefits received by their residents, with a partial waiver for Alaska and Hawaii to win the support of Alaska Republican Lisa Murkowski.. 

Border wall and detention centers

The president’s crackdown on undocumented migrants would get $45 billion for detention centers and nearly $47 billion for infrastructure at the southern border, including wall construction. 

Remittances

Migrants and others who send money abroad would be taxed at 1% of the amount of the transfer. That’s a decrease from a 3.5% levy in the House version of the bill.