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Senate Unveils Tax Cut Package as Part of Trump’s New Spending Bill

The Senate Finance Committee has officially released its version of President Donald Trump’s ambitious new spending package, unveiling a plan that could have major tax implications for millions of Americans. The proposed legislation would permanently extend the 2017 Tax Cuts and Jobs Act (TCJA), while also introducing new tax breaks targeted at families, workers, and businesses.

The Senate proposal differs from the version that passed the House last month, setting up what could be intense negotiations between the two chambers as they race to meet their self-imposed July 4 deadline for finalizing the package.

Key Differences Between House and Senate Versions

While both the House and Senate versions share the common goal of making the TCJA cuts permanent, there are important distinctions:

• Child Tax Credit:
  The Senate bill raises the nonrefundable Child Tax Credit to $2,200 starting in 2025, slightly lower than the House’s proposal of $2,500.
• Tipped Income Deduction:
  In a nod to Trump’s campaign pledge, both versions eliminate taxes on tipped income. However, the Senate version caps this deduction at $25,000 annually and imposes income-based eligibility rules.
• State and Local Tax (SALT) Deduction Limits:
  The Senate takes a more restrictive approach to SALT deductions than the House version, a sticking point that could become a flashpoint in negotiations.
• Medicaid and Clean Energy Provisions:
  There are also significant differences in how the two chambers approach Medicaid funding and clean energy tax credits, which may complicate reconciliation efforts.

What It Means for Taxpayers in 2026

The 2017 TCJA introduced sweeping, though temporary, changes to the U.S. tax code. These included:

• Doubling the standard deduction (from $12,000 to $24,000 for married couples in 2018)
• Lowering individual income tax rates across all brackets
• Increasing the child tax credit
• Raising income thresholds for tax brackets

However, these provisions are scheduled to expire at the end of 2025. If Congress allows them to lapse, approximately 62% of taxpayers would face higher tax bills starting in 2026, according to the Tax Foundation.

"Lawmakers across both parties are motivated to prevent these tax increases from hitting middle-class Americans," says Erica York, vice president of federal tax policy at the Tax Foundation. "On net, most taxpayers will see a tax cut, and on average, all income groups would see a tax reduction under these proposals."

Why The Standard Deduction Matters

Since the TCJA nearly doubled the standard deduction, the majority of Americans now take the standard deduction rather than itemizing. In 2022, only 9% of taxpayers itemized their deductions compared to 31% before the TCJA took effect. Both the Senate and House bills propose increasing the standard deduction further after 2025, ensuring that most filers continue to enjoy simpler tax filing.

How to Know If You’re Getting a Tax Cut

Tax experts caution taxpayers not to judge their savings based solely on their annual tax refund.

“Your refund simply reflects how accurately your tax withholding matched your actual tax liability,” York explains. “The better measure is comparing your total tax liability year-over-year.”

In other words, if you’re paying less total tax next year than you did this year, you’ve received a tax cut—even if your refund is smaller.

The Bigger Picture: TCJA’s Legacy

Originally passed as part of Trump’s signature economic policy, the TCJA was designed to stimulate growth by reducing tax burdens on individuals and corporations. Supporters argue that extending these provisions permanently will maintain economic momentum, protect middle-class households, and keep the U.S. tax code globally competitive.

However, critics have raised concerns about the long-term cost of making these cuts permanent. According to Congressional Budget Office estimates, permanently extending the TCJA provisions could add over $3 trillion to the national debt over the next decade.

What Comes Next

With just weeks remaining until the July 4 deadline, lawmakers will need to resolve key differences between the Senate and House versions. While broad agreement exists on preserving tax cuts for most Americans, the details—especially around income limits, deduction caps, and offsets to pay for the cuts—are still being fiercely debated.

For now, the overwhelming majority of Americans can expect good news: unless major surprises emerge, most taxpayers are likely to continue benefiting from lower tax rates well beyond 2025.