Great Lakes Wire

With the One Big Beautiful Bill (OBBB), several provisions will impact employers. Below is a summary of the major ones.

Workers can deduct up to $12,500 in overtime pay from their taxable income on federal tax returns, retroactive to January 1, 2025. This deduction applies only to non-exempt employees and phases out for those earning more than $150,000. Additionally, all reported tips up to $25,000 per person per year are now exempt from federal income tax.

The OBBB establishes Trump Accounts as a new type of custodial account for minors born between January 1, 2025, and December 31, 2028. These accounts are initially funded with $1,000 by the Treasury and can grow tax-free until withdrawal.

Employers may offer dependent care flexible spending accounts (DCFSAs) with increased contribution limits starting after December 31, 2025. The OBBB also makes permanent an exemption allowing telehealth services without applying a deductible for Health Savings Account (HSA) eligibility.

For executive compensation in public companies exceeding $1 million annually, deductions are limited. In non-profits, Section 4960 imposes an excise tax on remuneration over $1 million.

The OBBB permanently allows employers to offer educational assistance related to student loans tax-free and eliminates tax-free reimbursement for bicycle commuting expenses. It increases credits for employer-provided childcare expenses and permanently establishes a credit for paid family and medical leave under IRC section 45S.

"The above is a sampling of tax changes HR needs to be aware of," says Anthony Kaylin courtesy of SBAM-approved partner ASE.