On July 4, 2025, Congress passed the One Big Beautiful Bill Act (OBBBA)—a sweeping piece of legislation aimed at boosting take-home pay, expanding tax relief, and making life easier for both workers and small businesses. If you’re a small business owner or an employee trying to navigate payroll, benefits, or taxes, here’s what you need to know.
Tax Breaks for Employees
The OBBBA introduces two new deductions that directly benefit workers:
Overtime Pay Deduction
Employees can now deduct up to $12,500 (or $25,000 for joint filers) in required overtime wages from their taxable income. This deduction phases out at $150,000 AGI for single filers and $300,000 for joint filers.
Tip Income Deduction
Workers in tip-based industries (think hospitality or service roles) can now deduct up to $25,000 in qualified tip income—as long as it was received before 2025. This also phases out for higher-income earners.
Both of these deductions are available for 2025 through 2028.
R&D Tax Relief for Small Businesses
One of the biggest wins for small businesses: the restoration of immediate expensing for domestic research and development (R&D) costs under Section 174.
Previously, businesses were required to amortize R&D expenses over several years. Now, they can deduct the full amount right away. Even better—small businesses with less than $31 million in revenue can retroactively amend 2022–2024 returns to reclaim those deductions.
Health, Family, and Education Benefits Expanded
Expanded HSA Eligibility
High-deductible health plans tied to the Bronze/Catastrophic tiers or direct primary care models are now HSA-eligible. Telehealth coverage also qualifies for deductible waivers.
Dependent Care FSAs
The cap for pre-tax dependent care flexible spending accounts rises from $5,000 to $7,500.
Paid Family and Medical Leave Credit
If you offer at least 2 weeks of paid family or medical leave, you could qualify for a new tax credit of up to $500,000—or $600,000 if you’re a small business. Your policy must be in writing and cover at least 50% of wages to qualify.
Student Loan Repayment
The bill makes employer-paid student loan assistance (up to $5,250/year) permanently tax-free.
Child Tax Credit Gets a Boost
The Child Tax Credit increases from $2,000 to $2,200 per child, with the refundable portion rising to $1,700 starting in 2025. That’s more money back in the pockets of working families.
Big Wins for Business Deductions
If you’re planning big purchases or financing growth, there’s good news:
- Section 179 expensing limits are restored to $2.5 million.
- Businesses can now fully deduct interest on loans, thanks to changes to Section 163(j).
- Depreciation rules return to more generous pre-2018 standards—saving you money faster.
What You Should Do Now
To make the most of these changes, here are a few steps to consider:
- Track Overtime & Tip Income Accurately – to help your employees claim deductions.
- Update Payroll & Benefit Systems – to reflect the new IRS requirements and deduction caps.
- Revise Your Leave Policy – to take advantage of the new Paid Leave Credit.
- Review Capital Investments – and leverage updated depreciation and interest rules.
- Amend Prior Returns (if eligible) – especially for R&D expenses between 2022–2024.
The One Big Beautiful Bill Act offers powerful opportunities for small business owners and employees alike—but many of its benefits are temporary or retroactive, and require thoughtful planning.
If you need help adjusting your payroll systems, updating leave policies, or understanding how these changes affect your business, let’s connect. At Assisting Done Right, LLC, we specialize in making sure your systems are up to date and your finances are handled right—the first time.