On Friday, May 9, the House Ways and Means Committee released 28 pages of proposed tax legislation. That was followed by another 350+ pages of proposals on Monday, May 12. Overall, the bill clocks in at 389 pages.

This legislation is our first view of how the Tax Cuts and Jobs Act (TCJA) may or may not change as its December 31 sunset approaches. It is important to note that this is a first draft of the reconciliation bill, and if it’s like most of my other articles on timely topics, we will see significant changes and updates in the days and weeks following this writing.

That said, given the anticipation surrounding the fate of the TCJA, the sooner we can begin delving into the change and the potential implications for investors, the better.

Here are a few of the highlights:

1. The bill calls for a “permanent” extension of the current tax brackets. It’s also noteworthy that we did not see a new top rate of 39.6% for individuals making over $2.5 million, which had been floated by the Trump administration.

Note: It’s important to understand that “permanent” in this case means until another Congress passes another tax bill in the future. So, yes, these tax brackets and other permanent provisions highlighted below could continue ad infinitum, but I am confident that we’ll see tax policy changes in the future.

2. The increased standard deduction would be extended permanently based on the text of this bill, with a notable, yet temporary, change: An increase in the standard deduction by $1,000 for individuals and $2,000 for married couples for taxable years beginning after December 31, 2024, and before January 1, 2029.

3. The estate tax would be maintained, and the exemption would be increased to $15 million per person. This increase would continue the trend illustrated in this chart, even though some have called for the estate tax to be eliminated completely.

4. The cap on state and local tax (SALT) deductions would be increased to $15,000 for individuals or married couples filing separate tax returns and to $30,000 for married couples filing a joint return. This higher deduction amount would begin to phase out as income exceeds $200,000 (individuals and married filing separately) or $400,000 (married filing jointly). That phaseout would equal 20% of the amount in excess of the income limits and would stop at a deduction floor of $5000 or $10,000, based on filing status.

5. The Qualified Business Income deduction (QBI) would be increased to 23% from 20%. As we move forward in this process, it will be interesting to see if this percentage changes: When it was originally implemented (via the TCJA 2017), its purpose was to reduce the effective tax rates of pass-through business owners by an amount roughly parallel to those of C-corporations.

Along with the items listed above, the bill includes provisions for no taxes on tips, no taxes on overtime pay, and a tax deduction for “seniors” of $4,000. It also introduces something called a “money account for growth and advancement” (MAGA), a tax-favored account for children that can be used for education, home purchase, or small business development. The government would provide a $1,000 tax credit to help fund these accounts for children born between 2025 and 2028, and families could contribute up to $5,000 extra annually.

We’ll continue to follow developments on the TCJA over the coming weeks. At this point, the most important thing for advisors and investors to know is that all these provisions are proposals; nothing has been codified yet. We will certainly see changes, which is why it’s important to use the current tax code – and more importantly, your current financial plans and goals – as the North Star that guides your decision making.

The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a financial professional. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information.