How Senate Republicans want to change the tax breaks in Trump’s big bill

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WASHINGTON (AP) — House and Senate Republicans are taking slightly different approaches when it comes to the tax cuts that lawmakers are looking to include in their massive tax and spending cuts bill.

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Republicans in the two chambers don’t agree on the size of a deduction for state and local taxes. And they are at odds on such things as allowing people to use their health savings accounts to help pay for their gym membership, or whether electric vehicle and hybrid owners should have to pay an annual fee.

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The House passed its version shortly before Memorial Day. Now the Senate is looking to pass its version.

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While the two bills are similar on the major tax provisions, how they work out their differences in the coming weeks will determine how quickly they can get a final product over the finish line. President Donald Trump is pushing to have the legislation on his desk by July 4th.

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Here’s a look at some of the key differences between the two bills:

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Tax break for families

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The child tax credit currently stands at $2,000 per child.

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The House bill temporarily boosts the child tax credit to $2,500 for the 2025 through 2028 tax years, roughly the length of President Donald Trump’s second term. It also indexes the credit amount for inflation beginning in 2027.

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The Senate bill provides a smaller, initial bump-up to $2,200, but the bump is permanent, with the credit amount indexed for inflation beginning next year.

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Trump campaign promises

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Trump promised on the campaign trail that he would seek to end income taxes on tips, overtime and Social Security benefits. Also, he would give car buyers a new tax break by allowing them to deduct the interest paid on auto loans.

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The House and Senate bills incorporate those promises with temporary deductions lasting from the 2025 through 2028 tax years, but with some differences.

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The House bill creates a deduction on tips for those working in jobs that have customarily received tips. The House also provides for a deduction for overtime that’s equal to the amount of OT a worker has earned.

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The Senate bill comes with more restrictions. The deduction for tips is limited to $25,000 per taxpayer and the deduction for overtime is limited to $12,500 per taxpayer.

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The House and Senate bills both provide a deduction of up to $10,000 for interest paid on loans for vehicles made in the United States.

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And on Social Security, the bills don’t directly touch the program. Instead, they grant a larger tax deduction for Americans age 65 and older. The House sets the deduction at $4,000. The Senate sets it at $6,000.

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Both chambers include income limits over which the new deductions begin to phase out.

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More SALT

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The caps on state and local tax deductions, known in Washington as the SALT cap, now stand at $10,000.

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The House bill, in a bid to win over Republicans from New York, California and New Jersey, lifts the cap to $40,000 per household with incomes of less than $500,000. The credit phases down for households earning more than $500,000.