The Tax Reform Reality Check: What Just Happened (And What's Coming Next)
Yogesh Prasad, CFA, CAIA, CHP
CEO & Founder of Confluent Asset Management
Look, I get it. Tax news is about as exciting as watching paint dry. But here’s the thing, what happened in Washington this past month is going to hit your wallet in ways you probably haven’t thought about yet. And honestly? Most of the coverage I’ve seen has been either too wonky or too political to actually help you understand what’s coming.
So let me break it down for you, person to person.
The Big Picture: What Actually Happened
On May 22nd, House Republicans barely squeezed through what they’re calling the “One Big Beautiful Bill”, and I mean barely. The bill passed by a vote of 215 in favor, 214 opposed, with one member voting present. That’s cutting it close, even by Washington standards.
But here’s what’s really interesting, and this is where it gets messy. The Senate isn’t just rubber-stamping this thing. Republicans added some additional ones – things the president campaigned on, like no taxes on tips, no taxes on overtime, but Senate leaders like John Thune are already signaling major changes are coming.
The reality check: This isn’t done yet. Not even close.
What's Actually In This Thing (The Stuff That Matters to You)
The big one everyone’s been worried about, those 2017 tax cuts expiring, looks like it’s getting extended. Both House and Senate versions want to make the individual tax rates permanent. So if you’ve been planning around your current tax bracket, you can probably stop losing sleep over it.
The SALT Cap: This Is Where It Gets Interesting
You know that $10,000 limit on deducting state and local taxes? The House bill would bump it up to $40,000. That’s huge if you live in a high-tax state like New York or California.
But, and this is a big but, the SALT deduction in limbo as Senate Republicans unveil tax plan. The Senate version is being cagey about this, which tells me they’re either not sold on it or they’re using it as a bargaining chip.
My take: If you’re in a high-tax state, don’t bank on this yet. But start running the numbers on what it could mean for you.
Business Owners: Some Real Wins Here
The qualified business income deduction (that 20% deduction for pass-through businesses) isn’t just getting extended. Section 199A, the qualified business income deduction for passthrough entities, would be extended past its Dec. 31, 2025, expiration and expanded slightly, to 23% from 20%.
That’s real money if you’re a business owner. We’re talking about an extra 3% deduction on your business income.
The Estate Tax: Wealthy Families Can Breathe Easier
This one’s for the high-net-worth crowd. The House bill would bump the estate tax exemption to $15 million per person ($30 million for couples) starting in 2026. That’s up from the current $13.9 million. But here’s what’s really wild, some senators want to just eliminate the estate tax entirely. Although the final version of the TCJA did not repeal the death tax, the law effectively doubled the individual estate and gift tax exclusion, and they’re not done pushing.
Families: The Child Tax Credit Gets Weird
Provides a temporary $500 per child boost (so that the maximum credit is $2,500 per child) from 2025-2028. After that, it drops back to $2,000 but gets adjusted for inflation. Oh, and they’re calling the new savings accounts for kids “Trump Accounts” now. Yes, really. You can put $5,000 a year into these things, and kids born between 2025-2029 would get $1,000 from the government to start.
The Stuff Nobody's Talking About (But Should Be)
Universities Are Getting Hammered
If you care about higher education, this part’s going to sting. The bill cranks up taxes on university endowments based on their “endowment per student” ratio. We’re talking rates that could hit 21% for schools with the biggest endowments.
Translation: Expect tuition to go up even more as schools try to cover these new costs.
Foundations: The Bigger You Are, The More You Pay
Private foundations with over $50 million in assets are looking at higher investment income taxes. The current 1.39% rate could jump to 2.78% for medium-sized foundations, and all the way up to 10% for the giants with over $5 billion.
That Weird Remittance Tax
There’s this new tax on money sent overseas, but frankly, nobody seems to know exactly how it’s going to work yet. The language is vague enough that it could hit a lot of people sending money to family abroad.
What's Really Going to Happen (My Prediction)
Here’s the thing, Both bills would make permanent the individual rate cuts and bracket adjustments, with slightly different changes to the inflation adjustments. The core tax cuts are probably safe. That’s what both parties can agree on. But everything else? That’s all negotiable.
The Senate is already talking about making some provisions permanent that the House only wanted to extend through 2029. The Senate proposal would make the trio of tax-relief provisions from the 2017 Tax Cut and Jobs Act permanent. In contrast, the House bill would only extend them through 2029.
My gut feeling: We’ll get a compromise that looks more like the Senate version – fewer bells and whistles, but the stuff that makes it through will be permanent.
What You Should Be Doing Right Now
If You're in a High-Tax State
Don’t make any major moves based on that SALT cap increase yet. But start modeling what it could mean for your tax planning. If it happens, you might want to go back to itemizing instead of taking the standard deduction.
If You Own a Business
That QBI deduction bump is looking pretty solid. Start thinking about how an extra 3% deduction might affect your business structure decisions.
If You're Wealthy
Estate planning just got more complicated. The exemption might go up, but the rules around it are still shifting. Don’t make any major estate planning moves without talking to someone who knows what they’re doing.
If You're Everyone Else
The core tax cuts are probably safe, but keep an eye on how they pay for all this. The budget resolution would instruct Senate tax writers to advance tax legislation that increases the deficit by no more than $1.5 trillion, which means either spending cuts or other tax increases are coming.
The Bottom Line
This isn’t your typical tax reform where everything gets hashed out behind closed doors and then dropped on us. This is happening in real time, with real disagreements between the House and Senate about what should be in it.
The good news? Your basic tax rates are probably safe. The bad news? Everything else is still up in the air, and the final version could look pretty different from what passed the House.
My advice: Don’t panic, but don’t plan your entire 2025 around this bill either. The only thing we know for sure is that more changes are coming.
Sources: Journal of Accountancy, NPR, CNBC, Grant Thornton, BDO, and various congressional sources as cited above.
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