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CVBA member RKL LLP, a leading advisory firm serving South Central Pennsylvania, is helping business owners and individuals navigate a major piece of proposed legislation. Originally published on their blog, this summary breaks down highlights from the House’s proposed tax package and what it could mean for our region’s businesses and families.

With the sunset of many of the Tax Cuts and Jobs Act provisions at the end of 2025, a much-anticipated tax and spending package was released by the House Ways and Means Committee on May 12. This 389-page bill is packed with changes that will affect tax planning for individuals, businesses, and estates. While House lawmakers aim for passage of their bill by Memorial Day, negotiations likely will be challenging with Republicans having minimal room for dissention given their slim majorities in both the House and Senate. The Senate Finance Committee has yet to publicly release their own version of the tax bill.

Here are some of the most notable provisions currently under consideration. Please understand that any of these provisions may end up being amended or removed before the bill becomes law. However, RKL anticipates the House bill provides a good indication of what will eventually become law.

Individual Tax Provisions

The draft introduces several changes aimed at individual taxpayers:

  • Tax Brackets: Current tax brackets continue and a new top tax bracket of 39.6% as advocated by President Trump is not included in the House bill.
  • Standard Deduction: Set to rise to $32,600 for married filing jointly (MFJ) in 2026.
  • Child Tax Credit: Proposed to increase from $2,000 to $2,500 per child from 2025 to 2028.
  • Itemized Deduction Cap: Limited to a 35% benefit, affecting taxpayers in the highest tax bracket.
  • Deductions for Tip & Overtime Pay: Permitted through 2028, subject to certain income limitations.
  • Seniors 65+: An additional $4,000 deduction phased out after $150k income for MFJ. This provision is being proposed to honor congressional reconciliation rules, rather than directly altering the taxability of Social Security benefits.
  • Car Loan Interest: A new above-the-line tax deduction for interest paid on vehicles assembled in the USA, phased out after $200k for MFJ.
  • SALT Cap: Increased to $30,000 for MFJ, phased out over $400k income. In addition, certain Pass-through Entity Taxes would be includible in the $30,000 limit. The SALT cap is hotly debated and will likely see further negotiation.
  • Newborn Money Accounts for Growth and Advancement: A new federally funded $1,000 account per child born between 2024 and 2028.
  • 529 Plans: Expanded to cover more eligible costs, enhancing educational savings options.
  • Charitable Deduction: The $300 above-the-line deduction returns, allowable regardless of whether a taxpayer is itemizing deductions.
  • 1099-K and 1099-MISC: Thresholds increased at which Form 1099 reporting is required.
  • Carried Interest: No changes proposed at this time despite President Trump’s advocacy for this potential revenue raiser.

Business Tax Provisions

Businesses can expect several incentives and adjustments:

  • QBI Deduction (Section 199A): Permanent increase in deduction from 20% to 23% starting in 2026 for qualified business income, and increased eligibility for certain specified service trades and businesses.
  • Business Loss Limitations under Section 461(l): More stringent limitations on carryover and future utilization of business losses.
  • Bonus Depreciation: Restoration of 100% immediate depreciation write-off on personal property acquired between January 20, 2025 and December 31, 2029.
  • Section 179: Limit increased to $2.5M, with phaseout starting at $4M.
  • Manufacturing Incentives: New provisions to permit 100% write-off of 39-year real property for manufacturing and processes facility expansions. In addition, simplified tax rules permitting cash method and favorable inventory rules for businesses under an $80M revenue threshold.
  • R&D Costs under Section 174: Expensing restored for costs incurred in the USA from 2025 to 2029. No more capitalization and amortization required for costs in those years.
  • Interest Deduction Limit under Section 163(j): EBITDA method returns from 2025 to 2029.
  • ERTC Refunds: Denied if filed after January 31, 2024.
  • C-corporation Charitable Deductions: No benefit until contributions exceed 1% of taxable income.

Estate and Energy Provisions

The draft also addresses estate planning and energy incentives:

  • Estate/Gift Exemption: Permanently increase to $15M per person in 2026 ($30M per married couple), indexed for inflation.
  • Clean Vehicle/EV Credits: Set to expire for most vehicles on December 31, 2025.
  • Renewable Energy Credits: Phased out by December 31, 2025, including residential solar and wind credits.
  • Residential Clean Energy Credit: Drops to 0% after 2025.

The House bill’s revenue raisers include the university endowment tax, SALT cap, repeal of certain energy credits, taxation of sport team owners, as well as revenue derived from reduction of waste and fraud.

There are a host of challenging issues ahead before a comprised tax bill can be signed by the President. Concerns may include the cost of the overall package, cuts to Medicaid and SNAP, SALT cap limitations, debt ceiling limit increases, and priorities of the Senate that may differ with those of the House. Despite Republicans having slim majorities in both chambers, dissenters on any issue could jeopardize ultimate passage.

As developments continue, be sure to visit RKL’s Events & Webinars page for more details on the upcoming “What’s Next” Webinar scheduled for Wednesday, June 4. Want to be sure you’re included in this and other late-breaking updates and guidance? Subscribe to RKL’s “Insights for What’s Next” enewsletter to stay in-the-know.

Contributed by Eric R. Wenger, CPA, MST, Partner in RKL’s Tax Services Group and Managing Partner of the firm’s Lancaster office. Eric primarily advises closely held and family owned companies regarding tax and general business matters, including succession planning.

Beside the Point is a member spotlight opportunity reserved for Cumberland Valley Business Alliance members at the Advocate, Champion, Visionary and Stakeholder levels. If you’re interested in upgrading your membership, please contact info@cvballiance.org.

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