The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4. Several sections will have a positive impact on employers and their employees.
These include:
- Employer-provided child-care credits. Employers will be allowed to take up to $500,000 in tax credits for providing employee child care. That’s up from the current $150,000 credit. The credit will also be adjusted for inflation.
- Paid Family and Medical Leave credit. A provision that was set to expire at the end of 2025 provided tax credits to employers that pay employees on FMLA leave. This would be made permanent and would be expanded to include a credit for insurance premiums employers pay while workers are on FMLA leave.
- Tuition and student loan reimbursement. Employers would continue to provide workers with student loan reimbursement, and the limit would be adjusted for inflation. Currently, the limit is $5,250 per year. This will help offset another provision in the legislation, which limits student loan repayment options for workers, raising their minimum required payments.
- No tax on tips. Employees who earn tips and make less than $160,000 per year could deduct tips from their income at tax time – with some limits. This would result in lower taxes. Expect employees to inquire about this, and work with your payroll provider to implement the provision as soon as the IRS gives the go-ahead.
- Overtime. Like taxes on tips, the bill would allow employees who work overtime to exclude their overtime pay from federal taxes – with limits. As for taxes on tips, employers will have to change their payroll practices to code overtime pay as exempt once the IRS has worked out the forms and details.
Source: Employment Law | August 2025