As Senate Republicans debate trillions of tax breaks advanced by the House, some business owners could be blocked from part of the proposed windfall, policy experts say.

If enacted as written, the House GOP’s “One Big Beautiful Bill Act” would raise the federal deduction limit for state and local taxes, known as SALT, to $40,000. That would phase out once income exceeds $500,000.

The bill would also boost a tax break for pass-through businesses, known as the qualified business income, or QBI, deduction, to 23%. But the measure would end a popular state-level SALT cap workaround for certain pass-through business owners.  

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Here’s what to know about the proposed change and who could be impacted.

Enacted via the Tax Cuts and Jobs Act, or TCJA, of 2017, there’s currently a $10,000 limit on the SALT deduction for filers who itemize tax breaks. This cap will expire after 2025 without changes from Congress. The SALT deduction was unlimited before TCJA, but the so-called alternative minimum tax reduced the benefit for some higher earners.

The cap has been a pain point in high-tax states like New York, New Jersey and California because residents can’t deduct more than $10,000 for SALT, which includes income, property and sales taxes.  

However, most states now have a “workaround” to bypass the federal SALT deduction limit for pass-through business owners, explained Garrett Watson, director of policy analysis at the Tax Foundation.

As of May 9, some 36 states and one locality, New York City, have enacted a workaround — the pass-through entity, or PTE, level tax — since the 2017 TCJA limitation, according to the American Institute of Certified Public Accountants, or AICPA.

While each state has different rules, the strategy generally involves paying individual state and local taxes through a pass-through business to sidestep the $10,000 cap, Watson said. Owners can then deduct their share of SALT paid.

“This loophole is likely expensive, and lawmakers and the public should demand a clear accounting of the fiscal cost to bless workarounds for this favored group,” New York University Tax Law Center deputy director Mike Kaercher said in a statement after the revised House bill text was released in late May. 

Some industry groups, such as AICPA, have urged the Senate to maintain the SALT deduction workaround for SSTBs.

If the House bill is enacted as written, SSTBs would be “unfairly economically disadvantaged” by existing as a certain type of business, AICPA wrote in a May 29 letter to the Senate.

Since many SSTBs can’t organize as a C corporation, there’s “no option to escape the harsh results of the SSTB distinction,” which could limit these professionals’ SALT deduction, AICPA wrote.

The Trump administration paused its plan to garnish Social Security benefits for those who have defaulted on their student loans — but says borrowers’ paychecks are still at risk.

“Wage garnishment will begin later this summer,” Ellen Keast, a U.S. Department of Education spokesperson, told CNBC.

Since the Covid pandemic began in March 2020, collection activity on federal student loans had mostly been on hold. The Biden administration focused on extending relief measures to struggling borrowers in the wake of the public health crisis and helping them to get current.

The Trump administration’s move to resume collection efforts and garnish wages of those behind on their student loans is a sharp turn away from that strategy. Officials have said that taxpayers shouldn’t be on the hook when people don’t repay their education debt.

“Borrowers should pay back the debts they take on,” said U.S. Secretary of Education Linda McMahon in a video posted on X on April 22.

Here’s what borrowers need to know about the Education Department’s current collection plans.

The Education Department previously said Social Security benefits could be garnished starting in June. Depending on details like their birth date and when they began receiving benefits, a recipient’s monthly Social Security check may arrive June 3, 11, 18 or 25 this year, according to the Social Security Administration.

More than 450,000 federal student loan borrowers age 62 and older are in default on their federal student loans and likely to be receiving Social Security benefits, according to the Consumer Financial Protection Bureau.

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The administration’s announcement gives borrowers more time to try to get current, and to avoid a reduced benefit check down the line.

“The Trump Administration is committed to protecting Social Security recipients who oftentimes rely on a fixed income,” said Keast.

Borrowers can also challenge the wage garnishment if it will result in financial hardship, he added.

The U.S. Department of Education is pausing its plan to garnish people’s Social Security benefits if they have defaulted on their student loans, a spokesperson for the agency tells CNBC.

“The Trump Administration is committed to protecting Social Security recipients who oftentimes rely on a fixed income,” said Ellen Keast, an Education Department spokesperson.

The development is an abrupt change in policy by the administration.

The Trump administration announced on April 21 that it would resume collection activity on the country’s $1.6 trillion student loan portfolio. For nearly half a decade, the government did not go after those who’d fallen behind as part of Covid-era policies.

The federal government has extraordinary collection powers on its student loans and it can seize borrowers’ tax refunds, paychecks and Social Security retirement and disability benefits. Social Security recipients can see their checks reduced by up to 15% to pay back their defaulted student loan.

More than 450,000 federal student loan borrowers age 62 and older are in default on their federal student loans and likely to be receiving Social Security benefits, according to the Consumer Financial Protection Bureau.

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