It looks like ‘business as usual’ as left in a huff from the U.S. tax policy. The One Big Beautiful Bill (OBBBA) comes as a massive overhaul that’s going to change how we run our payroll, manage employee benefits, and plan our 2026 budget.
OBBBA was signed into law on July 4, 2025, and extends the best parts of the 2017 tax reforms while also bringing a few curveballs. For employers, the wild part is figuring out how to dodge penalties.
OBBBA at a glance, what you need to know
The OBBBA is a $3 trillion gamble. It promises to bring familiar favorites from the 2017 Tax Cuts and Jobs Act. As the same time, it introduces tax-deferred savings for kids, while shifting the focus toward fossil fuels and domestic manufacturing.
The most immediate changes we’ve witnessed so far are the ‘No Tax on Tips’ and ‘No Tax on Overtime’ provisions. While these are great for morale but a potential headache for those in HR.
What OBBBA brings to the table
This is where the rubber meets the road. OBBBA introduces significant deductions for the people who keep your business running:
- Tax-Free Tips: Employees in specific industries (like hospitality and delivery) can now deduct up to $25,000 in tips.
- Overtime Breaks: Workers can deduct up to $12,500 in overtime pay ($25,000 for joint filers).
So, what’s the catch? Unfortunately, the burden of proof is on employers. Starting in 2026, employers will need to report these separately on Form W-2 with specific occupation codes. If your payroll system isn’t set up to distinguish “FLSA-qualified overtime” from “contractual overtime,” you’re looking at a compliance nightmare.
There’s a win for business owners
At the same time, there are some carrots in the bill for business owners.
- Permanent QBI Deduction: The 20% deduction for pass-through entities is here to stay.
- Instant Gratification: We’re back to 100% bonus depreciation for equipment and manufacturing structures. If you’re planning to upgrade your facilities, now is the time.
- R&D Boost: You can once again fully expense domestic R&D costs immediately, rather than amortizing them over years.
- Family-Friendly Credits: The credit for providing childcare has jumped to 40% (and 50% for small businesses).
The OBBBA offers some of the most robust business incentives we’ve seen in a decade, but it also demands a level of reporting precision that many small-to-mid-sized companies aren’t used to. Don’t wait until tax season 2026 to realize your systems aren’t ready.
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