Tax Changes for the Wealthy in New Bill

On June 30, 2025, views of the US Capitol in Washington, DC, are striking.

According to tax experts, President Donald Trump’s “Big Beautiful Building” introduces several new tax credits, notably extending many features from the 2017 tax cut. It’s estimated that taxpayers earning over $1 million could see a post-tax income boost of about 3% under the Senate’s version of the bill, slightly higher than the national average of 2.5%. For billionaires, this translates to an average increase of about $75,000 in 2026.

The core parts of the 2017 tax cut are expected to receive approval from the House soon, and many of these provisions may become permanent. Additionally, new tax credits are being added, particularly benefiting wealthy individuals and small business investors.

SALT Deductions

Interestingly, the Senate bill aligns with the House’s stance on the state and local tax (SALT) deductions, proposing to raise the current $10,000 cap. For individuals earning under $500,000, this may increase to $40,000, with an annual income threshold adjustment of 1%. Initially, there was some resistance from the Senate against changes that would mainly aid top earners in blue states, but after discussions, a $40,000 cap was accepted.

The Senate version, unlike the earlier House proposal, maintains a loophole that facilitates workarounds to avoiding the cap. Many states use workarounds known as Passthrough Entity Tax (PTET) that assist owners and partners in sidestepping state-level limitations. This setup benefits a broad range of professions—from car dealers to accountants—though it doesn’t help employees within those companies.

Kyle Pomerleau from the American Enterprise Institute pointed out that the House version aimed to remove loophole benefits for many white-collar workers, including those in the service sector. The Senate did not adopt these revisions.

Stock Benefits for Qualified Small and Medium Enterprises

Changes concerning qualified small and medium-sized business (QSB) stocks have garnered support from investors and entrepreneurs. Designed initially in the Clinton era and later expanded during Obama’s presidency, the program incentivizes investment in small businesses. Currently, investors in qualifying company C can enjoy capital gains tax reductions if they hold their investment for more than five years. Qualification as a “Small and Medium Enterprise” is based on having total assets below $50 million, with owners exempt from capital gains tax on sales of up to $10 million, or 10 times their original investment.

The Senate bill elevates the qualifying threshold to $50-$75 million for small businesses and raises exclusions from $10 million to $15 million, creating a new tier to benefit those looking to sell.

Justin Miller from Evercore remarked that these new regulations encourage investments in small businesses with significant growth potential.

Real Estate and Gift Tax

Similar to the House’s proposal, the Senate version aims to make real estate taxes permanent, eliminating any expiration date. The exemption could rise to $15 million per property, and up to $30 million for couples, with adjustments for inflation.

For affluent individuals, real estate tax regulations are particularly noteworthy, as they’ll benefit from stability in the current framework at least until the next election cycle.

Itemized Deductions

The Senate bill imposes limits on the value of itemized deductions, a continuation from the House bill. For individuals, the standard deduction is set at $15,000, and $30,000 for couples, meaning only about 10% of high-income earners still itemize. Both bills require top bracket taxpayers to reduce the value of each deduction by a certain percentage, resulting in a net benefit of about 35 cents per dollar deducted, rather than the previous 37 cents.

Charitable Contributions

The news around charitable contributions has mixed implications depending on income levels. For low- and middle-income earners, the Senate bill contains provisions aimed at promoting charitable giving, particularly for those who no longer itemize deductions. The 2017 tax cut had effectively minimized the incentive for many to claim charitable deductions. The new bill permits standard deduction claimants to also deduct up to $1,000 for singles and $2,000 for joint filers.

However, for affluent contributors who provide a bulk of donations, the bill is less favorable. It reduces the value of their charitable deductions by closing the itemized deduction and sets a new baseline at 0.5% of total income, adjusted for the itemized charitable deduction. Consequently, individuals with an adjusted gross income of $1 million wouldn’t see a tax benefit on their initial $5,000 contribution.