House GOP bill proposes a number of new tax cuts. Here’s how that could impact your money.

As a Republican-backed bill moves ahead in the House, proposed tax cuts under the measure include some new and surprising changes that could impact the wallets of millions of Americans. 

On Wednesday, the House Ways and Means Committee voted in favor of the bill, which would make Mr. Trump’s 2017 tax cuts permanent while also adding a host of other reductions. 

The extension of the 2017 Tax Cuts and Jobs Act provisions would mean that most taxpayers wouldn’t see much of a change because their tax brackets would remain at the same levels they’ve been at since the cuts took effect in 2018. Without an extension, more than 6 in 10 filers would face a tax increase in 2026, according to an analysis from the nonpartisan Tax Foundation. 

Aside from extending the 2017 tax cuts, the proposed bill would provide taxpayers with an average $1,300 tax reduction, according to the House Ways and Means Committee. Some of the additional tax cuts include those promised on the campaign trail by Mr. Trump, such as eliminating taxes on overtime pay, as well as new provisions that would lower taxes for senior citizens and parents. 

The proposed bill is likely to change as it moves through the legislative process, with House Speaker Mike Johnson, a Republican from Louisiana, aiming to send it to the Senate by Memorial Day. Democratic lawmakers have opposed the bill for its proposed cuts to Medicaid and food stamps, part of the GOP’s goal to find $880 billion in savings to help pay for the tax cuts. 

Some Democrats also pointed out that some of the tax cuts promised by Mr. Trump, such as eliminating taxes on tips, would expire after 2028, limiting the benefits.

“[T]hey made provisions like addressing taxes on tips and overtime pay temporary, as opposed to the cuts for the richest 1%, which they made permanent,” said Rep. Don Beyer, a Democrat from Virginia who serves on the House Ways and Means Committee, in a statement.

Still, the bill released Wednesday by the House’s tax panel provides a laundry list of tax breaks that could soon become law. Here’s what the legislation would do:

Adds a new $4,000 deduction for people 65 and older

Senior citizens who are 65 and older would get a new tax benefit — an extra deduction of $4,000 per filer. 

The new deduction could be used by people who either itemize or take the standard deduction. But there would be an income limit, with the $4,000 deduction available for people with a modified adjusted gross income of $75,000 or less for single filers and $150,000 for married couples who file joint returns. 

The tax break would be available starting in the current 2025 tax year and extend through 2028. 

By contrast, for seniors the latest version of the House bill has one notable omission: There’s no plan to eliminate taxes on Social Security income, as Mr. Trump promised in his campaign. 

Proposing to scrap income taxes on Social Security proved controversial because those taxes directly fund the retirement program. That would likely hasten the insolvency of its trust funds, policy experts have warned. 

Increases the standard deduction for all taxpayers

The current standard deduction, which was expanded under the 2017 tax bill, is set to expire on Dec. 31. The House GOP bill would make the Tax Cuts and Jobs Act’s bigger deduction permanent, as well as give it a boost.  

Starting in the current 2025 tax year through 2028, here’s how the standard deduction would increase:

• Single taxpayers would see their standard deduction rise from $15,000 to $16,000
• Head of households would rise from $22,500 to $24,000
• Married couples filing jointly would increase from $30,000 to $32,000

The standard deduction reduces your tax liability because it lowers your taxable income by that amount. For instance, single taxpayers earning $50,000 would reduce their taxable income to $34,000 for the 2025 tax year under the proposed standard deduction.

Extends and increases the Child Tax Credit

The House bill also extends the $2,000 Child Tax Credit, which otherwise would revert to its pre-Tax Cuts and Jobs Act level of $1,000 per eligible child starting in 2026. That change would be permanent, the House Ways and Means Committee said. 

The proposal would also increase the Child Tax Credit to $2,500 per child for the current 2025 tax year through 2028, after which it would drop back to $2,000. 

Eliminates the 1099-K reporting rule

The proposed legislation would also abolish a controversial rule that would have required payment platforms like Venmo or Paypal to send 1099-K tax forms to anyone receiving over $600. 

Previously, such payment services only had to report users’ income to the Internal Revenue Service if they had more than 200 transactions, exceeding $20,000 in revenue. The IRS had delayed the implementation of the $600 rule after pushback from some online platforms as well as from Republican lawmakers. 

Increases the pass-through deduction for small businesses

The pass-through deduction for small businesses, which was enacted by the Tax Cuts and Jobs Act, also would increase under the House bill. 

The deduction allows small businesses, including partnerships, sole proprietorships (who are often gig workers) and S corporations, to subtract 20% of their qualified business income from their taxes, lowering their tax liability. Under the new bill, the deduction would rise to 23%. 

Eliminates taxes on tips

This follows Mr. Trump’s campaign pledge to eliminate taxes on tipped income, but it would apply only from the current 2025 tax year through 2028. 

The provision would create “an above-the-line deduction for qualified tips received by an individual in an occupation which traditionally and customarily receives tips during a given taxable year,” according to a summary of the bill from the House Ways and Means Committee.

Eliminates taxes on overtime pay

Another proposal from Mr. Trump — to eliminate taxes on eligible workers’ overtime pay — would also become a reality, but only for three years. 

Under the House bill, an above-the-line deduction for OT would be created from the current 2025 tax year through 2028. 

Allow car loan interest to be deducted

The House bill would also eliminate taxes on car loan interest by allowing consumers to deduct up to $10,000 for interest paid on vehicle loans.

This would have an income limit, phasing out for taxpayers with a modified adjusted gross income above $100,000 for single filers or $200,000 for married couples. Vehicles must have been assembled in the U.S. to qualify for the deduction.

This tax break would last only from the current 2025 tax year through 2028.