--- title: What Employers Need to Know About The Payroll Provisions in the OBBB description: Learn about the new payroll provisions in the One Big Beautiful Bill Act and how they impact your payroll processes and employee compensation strategies. image: https://blog.becpas.com/hubfs/OBBB%20-%20Payroll%20Provisions%20(1).jpg --- [Twitter ** ](https://www.facebook.com/BrownEdwardsCPAs?utm_source=BE+Website&utm_medium=Website+Icon&utm_campaign=BE+Website+Social+Icon&utm_content=Facebook) [Facebook-f ** ](https://www.linkedin.com/company/brown-edwards/?utm_source=BE+Website&utm_medium=Website+Icon&utm_campaign=BE+Website+Social+Icon&utm_content=LinkedIn) [Linkedin ** ](https://www.youtube.com/channel/UC3ReCSn6AFfdQiCUsH4oopA?utm_source=BE+Website&utm_medium=Website+Icon&utm_campaign=BE+Website+Social+Icon&utm_content=YouTube) [Youtube ** ](https://www.youtube.com/channel/UC3ReCSn6AFfdQiCUsH4oopA?utm_source=BE+Website&utm_medium=Website+Icon&utm_campaign=BE+Website+Social+Icon&utm_content=YouTube) [ Client Portal ](https://becpas.sharefile.com/Authentication/Login) [ Make A Payment ](https://becpas.com/payments/) [ Request Proposal ](https://becpas.com/request-for-proposal/) ![](https://blog.becpas.com/hubfs/OBBB%20-%20Payroll%20Provisions%20(1).jpg) # What Employers Need to Know About The Payroll Provisions in the OBBB Published by [ Melissa Price ](https://blog.becpas.com/author/melissa-price) on Aug 8, 2025 8:00:00 AM On July 4, 2025, the *One Big Beautiful Bill Act (H.R.1)* was signed into law, introducing sweeping changes to the tax code with significant implications for payroll and employment tax compliance. The Outsourced Accounting and Advisory practice at Brown Edwards is here to help clients understand how these changes affect their payroll processes and employee compensation strategies. Here are the key payroll-related provisions you should be aware of: ## **“No Tax on Tips” Deduction** Effective** 2025–2028**, employees and self-employed individuals in tip-based occupations may deduct up to **$25,000** in qualified tips from their federal income taxes. - Eligibility: Applies to occupations the IRS deems as “customarily and regularly receiving tips” as of December 31, 2024. - Reporting Requirements: Employers must report qualified tips and the recipient’s occupation on W-2s or other specified forms. - Phase-Out: Begins at **$150,000 MAGI** for individuals and **$300,000** for joint filers. - Exclusions: Employees and self-employed individuals in Specified Service Trades or Businesses (SSTBs) under Section 199A are not eligible. ## **“No Tax on Overtime” Deduction** Also effective **2025–2028**, employees can deduct the **“half portion**” of their time-and-a-half overtime pay from federal income taxes. - Deduction Limit: Up to **$12,500** for individuals and **$25,000** for joint filers. - Eligibility: Applies to overtime pay required under the Fair Labor Standards Act (FLSA). - Reporting: Employers must report total qualified overtime compensation on year-end tax forms. - Phase-Out: Same income thresholds as the tip deduction. ## **Employer Action Items** To stay compliant and support employees in maximizing these deductions, employers should: - **Update payroll systems** to track and report qualified tips and overtime separately. - **Train payroll staff** on new reporting requirements and deduction eligibility. - **Communicate with employees** about how these changes may impact their take-home pay and tax filings. - **Monitor IRS guidance**, expected by **October 2025**, for the official list of eligible tip-based occupations and further implementation details. These provisions present a unique opportunity for employers to enhance employee compensation strategies while ensuring compliance with new federal requirements. As always, proactive planning and clear communication will be key. Tags: [Tax](https://blog.becpas.com/tag/tax), [Client Accounting Services](https://blog.becpas.com/tag/client-accounting-services) [Back to Blog](https://blog.becpas.com) ## Related Articles ## [All Employers Can Defer Employment Tax Deposits Until Paycheck Protection Program Loan Is Forgiven](https://blog.becpas.com/all-employers-can-defer-employment-tax-deposits-until-paycheck-protection-program-loan-is-forgiven) APRIL 21, 2020 [Read More ](https://blog.becpas.com/all-employers-can-defer-employment-tax-deposits-until-paycheck-protection-program-loan-is-forgiven) ## [Tips Permitted as Qualifying Wages for the Employee Retention Credit](https://blog.becpas.com/tips-permitted-as-qualifying-wages-for-the-employee-retention-credit) By now, most restaurant operators are familiar with the Employee Retention Credit (ERC). As we... 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[Read More ](https://blog.becpas.com/irs-addresses-the-presidents-executive-order-on-employee-payroll-tax-deferral-in-notice-2020-65) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Melissa Price", "url" : "https://blog.becpas.com/author/melissa-price" }, "dateModified" : "2025-08-08T12:00:00.478Z", "datePublished" : "2025-08-08T12:00:00.000Z", "headline" : "What Employers Need to Know About The Payroll Provisions in the OBBB", "image" : [ "https://blog.becpas.com/hubfs/OBBB%20-%20Payroll%20Provisions%20(1).jpg" ], "mainEntityOfPage" : { "@id" : "https://blog.becpas.com/what-employers-need-to-know-about-the-payroll-provisions-in-the-obbb", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://blog.becpas.com/hubfs/2021%20BE-Logo-4color-oldgold-3.png" }, "name" : "Brown Edwards & Company, LLP" } } ```