September 2, 2025 • 10 mins
The One Big Beautiful Act was enacted on July 4, 2025. This legislation includes several significant changes that impact small businesses and their employees, particularly in areas of payroll, employment tax, and employee benefits. In this episode, we break down the One Big Beautiful Bill Act and what it means for small businesses. From tax changes to new deductions, we cover the most important updates you need to know to stay compliant and maximize opportunities. Listen in as we cover:
- [01:00] Overview of the One Big Beautiful Bill Act and its impact on small businesses
- [01:45] Federal income tax changes and what they mean for owners
- [05:10] New deductions for qualified overtime and tips, including retroactive rules
- [05:50] SALT deduction cap increase and benefits for high-tax states
- [06:55] Immediate expensing of R&D expenditures plus other business tax updates
- [09:05] Practical steps for business owners to prepare and take advantage of the changes
This content is based on generally accepted HR practices, is advisory in nature, and does not constitute legal advice or other professional services. ADP does not warrant or guarantee the accuracy, reliability, and completeness of the content. Employers are encouraged to consult with legal counsel for advice regarding their organization's compliance with applicable laws. This content is current as of the published date.
Copyright © 2025 ADP, Inc. All Rights Reserved. The ADP logo, ADP, RUN Powered by ADP, and HR{preneur} are registered trademarks of ADP, Inc. and its affiliates. All other marks are the property of their respective owners.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Jim (00:00):
Welcome to HRPreneur.
I'm Jim Duffy from MainStreet to Your Street.
Our HRPreneur podcast is centeredaround helping small businesses
like yours gain the knowledge youneed from hr, payroll, and hiring to
time, taxes, benefits, and insurance.
Today we're joined by Jennifer Tingleto talk about HR1, also known
(00:20):
as the One Big Beautiful Bill Act.
Jennifer is Vice President and GeneralCounsel of HRO Smart Compliance Solutions.
The one big, beautiful actwas enacted on July 4th, 2025.
This legislation includes severalsignificant changes that impact
small businesses and their employees,particularly in areas of payroll,
employment, tax, and employee benefits.
(00:43):
Let's explore certain components ofthis act that every small business
owner and HR professional should know.
Jennifer, it's great tohave you on the show today.
Jennifer (00:51):
Great to be here.
Thank you,
Jim.
Jim (00:53):
So Jennifer, let's start at the beginning.
What is the One Big Beautiful Bill act?
Jennifer (00:59):
Yes, great question.
The One Big Beautiful Bill Act signedinto law on July 4th, 2025, is a
significant new tax and spendinglaw that covers various topics from
tax deductions to employee benefits,with implications that employers
must understand to help facilitatecompliance and enhance operations.
(01:20):
The act includes permanent adjustmentsto tax rates and brackets initially
introduced through the 2017 Tax Cutsand Jobs Act, and introduces new tax
incentives that can significantly benefitboth small businesses and their employees.
Some of the key provisions in theACT are effective retroactively
to January 1st, 2025, whichcreates additional complexities.
Jim (01:43):
Jennifer, how does this bill affect federal income tax
rates for small businesses?
Jennifer (01:47):
The ACT permanently adopts the changes to federal tax rates and
standard deduction amounts that havebeen in effect since January 1st, 2018.
This means small businesses can continueto benefit from these lower rates, which
can help improve their bottom line.
Jim (02:02):
What are some of the new deductions introduced by the act?
Jennifer (02:05):
Well, there has been a lot in the press about the no tax on overtime
or tips, provisions included in the act.
Although under the current guidance,employers will continue to withhold
and remit payroll taxes on qualifiedovertime and qualified tips.
The ACT introduces new above the line taxdeductions for individuals that are paid
qualified overtime or qualified tips,providing financial relief to those that
(02:30):
work extended hours or receive tip income.
Jim (02:34):
Uh, Jennifer, are there any retroactive
applications of the deductions?
Jennifer (02:38):
Yes, both the qualified overtime and qualified
tips deductions are effectiveretroactively to January 1st, 2025.
The new deductions aretemporary and expire after 2028.
Jim (02:51):
What does this mean for small business owners?
Jennifer (02:54):
Well, because individuals that are paid qualified overtime
or qualified tips can take thededuction on their income tax return.
Beginning with the 2025 taxableyear, employers will be required
to report this information.
The act includes a transition rulefor 2025, which permits employers to
approximate the amounts designatedas qualified overtime or qualified
(03:17):
tips pursuant to a reasonablemethod that is specified by the
Secretary of Treasury for 2025.
So stay tuned for that guidance.
On August 7th, the IRS announced as partof its phased implementation of the act.
There will be no changes made fortaxable year 2025 forms including W2
1099 and form 941, which is utilizedto remit and report payroll taxes.
(03:43):
The IRS indicated in the guidance thatthis decision was made in an effort to
avoid disruptions during the tax filingseason and to give the IRS business
owners and tax professionals enough timeto implement the changes effectively.
Jim (03:58):
Jennifer, can you please explain what qualifies as a qualified overtime?
Jennifer (04:03):
Yes.
Qualified overtime refers toovertime pay required under the
Fair Labor Standards Act or FLSA.
Which is generally paid at1.5 times the regular rate for
hours over 40 worked in a week.
The deduction is limited to $12,500 forsingle filers and $25,000 for joint filers
(04:24):
and phases out at higher income levelsonly the premium portion of overtime
pay is eligible for the deduction.
It is important to note thatthis deduction does not apply
to overtime premiums thatare not required by the FLSA.
Including overtime premiums requiredunder state laws or pursuant to a contract
like a collective bargaining agreement.
(04:46):
As a small business owner, if you are ina state that requires additional overtime
or have union contracts that provideovertime premiums, or if you pay employees
overtime voluntarily, such as for workingon a holiday, you will need to account for
the qualified overtime amount separatelyin order to include this information
on reporting for 2026 through 2028.
Jim (05:09):
Can you please tell our listeners about qualified tips?
Jennifer (05:12):
Yes.
Qualified tips are cashtips received voluntarily in
customary tipping occupations.
Although credit card charges and poolsharing arrangements appear to be
included in the qualified tips definition,service charges and automatic tips
are not included and do not appearto be eligible for the deduction.
(05:33):
The deduction for qualified tipsis capped at $25,000 and phases
out at higher income levels.
The ACT mandates the Secretaryof the Treasury to provide a list
of qualifying occupations within90 days of enactment of the act.
Jim (05:48):
Jennifer, I'd like to ask you about how the SALT deduction
capped changes under this act.
Can you please explain?
Jennifer (05:54):
Yes, of course.
Uh, first I'd like to explainwhat the SALT deduction is.
Taxpayers who itemize their deductionsmay reduce their federal income tax
liabilities by claiming a deduction forcertain state and local taxes paid, which
is what we refer to as the SALT deduction.
The 2017 Tax Cuts and Jobs Actestablished a cap on the amounts that
(06:15):
could be claimed as SALT deductions.
This act temporarily raises thefederal cap on the SALT deduction from
$10,000 to $40,000 starting in 2025.
With adjustments for inflationthrough 2029, after which point the
limitation will revert back to $10,000.
This change can provide significant taxrelief for small business owners in high
(06:39):
tax states and permit them to deducta larger portion of their state and
local taxes on their federal returns.
Jim (06:46):
So Jennifer, many of our listeners are from the small business community.
Can you please discuss how the ACTimpacts research and development
expenses for small businesses?
Jennifer (06:56):
Great question.
The act reinstates a business's abilityto immediately deduct qualified domestic
research and development or R&Dexpenditures in the year they are incurred
and retroactively in certain cases.
This helps reduce taxable income.
The ACT also allows small businessesto immediately deduct domestic R&D
expenditures after December31st, 2024, eliminating the prior
(07:21):
requirement to capitalize andamortize them over five years.
Certain small businesses with averageannual gross receipts of 31 million or
less are allowed to amend prior yeartax returns to retroactively deduct R&D
expenses incurred for tax yearsbeginning after December 31st, 2021.
The ACT also allows businesses thatamortize to accelerate the remaining
(07:43):
deductions over a one or two year period.
These changes can significantlybenefit small businesses engaged
in innovation and development.
By permitting them to immediately deductthese expenses rather than amortizing
over several years, while the R&Dtax credit remains unchanged, the ACT
creates more flexibility and complexityfor businesses to determine how to best
(08:06):
leverage various R&D tax incentives.
Jim (08:10):
Thank you for clarifying that.
Uh, what other provisions ofthe act may benefit employers?
Jennifer (08:15):
The paid family and medical leave tax credit is now permanent
offering a tiered credit based onthe percentage of wages covered
by the employer during leave.
The credit starts at 12.5% if theemployer covers at least 50% of
wages and increases to 25% if thefull amount of wages are covered.
The Act also addresses several business taxprovisions, including making the Section
(08:38):
199A deduction permanent, restoring 100%bonus depreciation for specific property,
increasing the maximum expense deductionunder section 179, and reinstating
favorable treatment for business interestexpenses under section 163(j) of the code.
Jim (08:57):
You know, Jennifer, you shared a lot of insights with us just now, so what
should small business owners do next?
Jennifer (09:03):
I think regardless of your business size, business owners
need to not only understand the newcompliance requirements they will
be expected to meet, but also howto recognize activities that may
qualify for tax incentives properly.
Capturing these tax benefits canopen up new opportunities for cost
savings, strengthen the business'sability to support organizational
(09:24):
tax strategy and help a businessowner meet operational goals in a
changing legislative environment.
Jim (09:32):
Jennifer, thank you for sharing all of this with us.
I've, as you've been speaking, I'vetaken down a few notes, so I'd like
to recap a couple of points and,um, I'll come back to you afterwards
to make sure I'm being accurate.
So the first point is the One BigBeautiful Bill Act introduces several
important changes that can greatly benefitsmall businesses and their employees.
The second point is by proactivelyaddressing these requirements, businesses
(09:55):
can support their workforce, help toenhance employee satisfaction and adapt
to the evolving regulatory landscape.
And the third takeaway is, as we expectmore regulatory guidance on these changes
to be issued in the near future, it'scrucial for small business owners and HR
professionals to stay informed and seekguidance to maximize their benefits.
(10:17):
Were they correct?
Were they accurate?
That is accurate.
Great.
Thank you, Jennifer.
And this brings us tothe end of this episode.
Thank you once again, JenniferTingle for joining us.
We hope to have you back onHRpreneur in the future.
Jennifer (10:30):
It's been a pleasure to be here today.
Jim, thank you so much.
Jim (10:33):
Presented by ADP, HRpreneur focuses on the entrepreneurs and
business drivers who are shaping thegrowth of their companies and positively
impacting the lives of their employees.
With each episode, webring the experts to you.
We answer your questions and helpyou think beyond today so you can
discover more success tomorrow.
As always, thanks for listening to HRpreneur.
Welcome to HRPreneur.
I'm Jim Duffy from MainStreet to Your Street.
Our HRPreneur podcast is centeredaround helping small businesses
like yours gain the knowledge youneed from hr, payroll, and hiring to
time, taxes, benefits, and insurance.
Today we're joined by Jennifer Tingleto talk about HR1, also known
(00:20):
as the One Big Beautiful Bill Act.
Jennifer is Vice President and GeneralCounsel of HRO Smart Compliance Solutions.
The one big, beautiful actwas enacted on July 4th, 2025.
This legislation includes severalsignificant changes that impact
small businesses and their employees,particularly in areas of payroll,
employment, tax, and employee benefits.
(00:43):
Let's explore certain components ofthis act that every small business
owner and HR professional should know.
Jennifer, it's great tohave you on the show today.
Jennifer (00:51):
Great to be here.
Thank you,
Jim.
Jim (00:53):
So Jennifer, let's start at the beginning.
What is the One Big Beautiful Bill act?
Jennifer (00:59):
Yes, great question.
The One Big Beautiful Bill Act signedinto law on July 4th, 2025, is a
significant new tax and spendinglaw that covers various topics from
tax deductions to employee benefits,with implications that employers
must understand to help facilitatecompliance and enhance operations.
(01:20):
The act includes permanent adjustmentsto tax rates and brackets initially
introduced through the 2017 Tax Cutsand Jobs Act, and introduces new tax
incentives that can significantly benefitboth small businesses and their employees.
Some of the key provisions in theACT are effective retroactively
to January 1st, 2025, whichcreates additional complexities.
Jim (01:43):
Jennifer, how does this bill affect federal income tax
rates for small businesses?
Jennifer (01:47):
The ACT permanently adopts the changes to federal tax rates and
standard deduction amounts that havebeen in effect since January 1st, 2018.
This means small businesses can continueto benefit from these lower rates, which
can help improve their bottom line.
Jim (02:02):
What are some of the new deductions introduced by the act?
Jennifer (02:05):
Well, there has been a lot in the press about the no tax on overtime
or tips, provisions included in the act.
Although under the current guidance,employers will continue to withhold
and remit payroll taxes on qualifiedovertime and qualified tips.
The ACT introduces new above the line taxdeductions for individuals that are paid
qualified overtime or qualified tips,providing financial relief to those that
(02:30):
work extended hours or receive tip income.
Jim (02:34):
Uh, Jennifer, are there any retroactive
applications of the deductions?
Jennifer (02:38):
Yes, both the qualified overtime and qualified
tips deductions are effectiveretroactively to January 1st, 2025.
The new deductions aretemporary and expire after 2028.
Jim (02:51):
What does this mean for small business owners?
Jennifer (02:54):
Well, because individuals that are paid qualified overtime
or qualified tips can take thededuction on their income tax return.
Beginning with the 2025 taxableyear, employers will be required
to report this information.
The act includes a transition rulefor 2025, which permits employers to
approximate the amounts designatedas qualified overtime or qualified
(03:17):
tips pursuant to a reasonablemethod that is specified by the
Secretary of Treasury for 2025.
So stay tuned for that guidance.
On August 7th, the IRS announced as partof its phased implementation of the act.
There will be no changes made fortaxable year 2025 forms including W2
1099 and form 941, which is utilizedto remit and report payroll taxes.
(03:43):
The IRS indicated in the guidance thatthis decision was made in an effort to
avoid disruptions during the tax filingseason and to give the IRS business
owners and tax professionals enough timeto implement the changes effectively.
Jim (03:58):
Jennifer, can you please explain what qualifies as a qualified overtime?
Jennifer (04:03):
Yes.
Qualified overtime refers toovertime pay required under the
Fair Labor Standards Act or FLSA.
Which is generally paid at1.5 times the regular rate for
hours over 40 worked in a week.
The deduction is limited to $12,500 forsingle filers and $25,000 for joint filers
(04:24):
and phases out at higher income levelsonly the premium portion of overtime
pay is eligible for the deduction.
It is important to note thatthis deduction does not apply
to overtime premiums thatare not required by the FLSA.
Including overtime premiums requiredunder state laws or pursuant to a contract
like a collective bargaining agreement.
(04:46):
As a small business owner, if you are ina state that requires additional overtime
or have union contracts that provideovertime premiums, or if you pay employees
overtime voluntarily, such as for workingon a holiday, you will need to account for
the qualified overtime amount separatelyin order to include this information
on reporting for 2026 through 2028.
Jim (05:09):
Can you please tell our listeners about qualified tips?
Jennifer (05:12):
Yes.
Qualified tips are cashtips received voluntarily in
customary tipping occupations.
Although credit card charges and poolsharing arrangements appear to be
included in the qualified tips definition,service charges and automatic tips
are not included and do not appearto be eligible for the deduction.
(05:33):
The deduction for qualified tipsis capped at $25,000 and phases
out at higher income levels.
The ACT mandates the Secretaryof the Treasury to provide a list
of qualifying occupations within90 days of enactment of the act.
Jim (05:48):
Jennifer, I'd like to ask you about how the SALT deduction
capped changes under this act.
Can you please explain?
Jennifer (05:54):
Yes, of course.
Uh, first I'd like to explainwhat the SALT deduction is.
Taxpayers who itemize their deductionsmay reduce their federal income tax
liabilities by claiming a deduction forcertain state and local taxes paid, which
is what we refer to as the SALT deduction.
The 2017 Tax Cuts and Jobs Actestablished a cap on the amounts that
(06:15):
could be claimed as SALT deductions.
This act temporarily raises thefederal cap on the SALT deduction from
$10,000 to $40,000 starting in 2025.
With adjustments for inflationthrough 2029, after which point the
limitation will revert back to $10,000.
This change can provide significant taxrelief for small business owners in high
(06:39):
tax states and permit them to deducta larger portion of their state and
local taxes on their federal returns.
Jim (06:46):
So Jennifer, many of our listeners are from the small business community.
Can you please discuss how the ACTimpacts research and development
expenses for small businesses?
Jennifer (06:56):
Great question.
The act reinstates a business's abilityto immediately deduct qualified domestic
research and development or R&Dexpenditures in the year they are incurred
and retroactively in certain cases.
This helps reduce taxable income.
The ACT also allows small businessesto immediately deduct domestic R&D
expenditures after December31st, 2024, eliminating the prior
(07:21):
requirement to capitalize andamortize them over five years.
Certain small businesses with averageannual gross receipts of 31 million or
less are allowed to amend prior yeartax returns to retroactively deduct R&D
expenses incurred for tax yearsbeginning after December 31st, 2021.
The ACT also allows businesses thatamortize to accelerate the remaining
(07:43):
deductions over a one or two year period.
These changes can significantlybenefit small businesses engaged
in innovation and development.
By permitting them to immediately deductthese expenses rather than amortizing
over several years, while the R&Dtax credit remains unchanged, the ACT
creates more flexibility and complexityfor businesses to determine how to best
(08:06):
leverage various R&D tax incentives.
Jim (08:10):
Thank you for clarifying that.
Uh, what other provisions ofthe act may benefit employers?
Jennifer (08:15):
The paid family and medical leave tax credit is now permanent
offering a tiered credit based onthe percentage of wages covered
by the employer during leave.
The credit starts at 12.5% if theemployer covers at least 50% of
wages and increases to 25% if thefull amount of wages are covered.
The Act also addresses several business taxprovisions, including making the Section
(08:38):
199A deduction permanent, restoring 100%bonus depreciation for specific property,
increasing the maximum expense deductionunder section 179, and reinstating
favorable treatment for business interestexpenses under section 163(j) of the code.
Jim (08:57):
You know, Jennifer, you shared a lot of insights with us just now, so what
should small business owners do next?
Jennifer (09:03):
I think regardless of your business size, business owners
need to not only understand the newcompliance requirements they will
be expected to meet, but also howto recognize activities that may
qualify for tax incentives properly.
Capturing these tax benefits canopen up new opportunities for cost
savings, strengthen the business'sability to support organizational
(09:24):
tax strategy and help a businessowner meet operational goals in a
changing legislative environment.
Jim (09:32):
Jennifer, thank you for sharing all of this with us.
I've, as you've been speaking, I'vetaken down a few notes, so I'd like
to recap a couple of points and,um, I'll come back to you afterwards
to make sure I'm being accurate.
So the first point is the One BigBeautiful Bill Act introduces several
important changes that can greatly benefitsmall businesses and their employees.
The second point is by proactivelyaddressing these requirements, businesses
(09:55):
can support their workforce, help toenhance employee satisfaction and adapt
to the evolving regulatory landscape.
And the third takeaway is, as we expectmore regulatory guidance on these changes
to be issued in the near future, it'scrucial for small business owners and HR
professionals to stay informed and seekguidance to maximize their benefits.
(10:17):
Were they correct?
Were they accurate?
That is accurate.
Great.
Thank you, Jennifer.
And this brings us tothe end of this episode.
Thank you once again, JenniferTingle for joining us.
We hope to have you back onHRpreneur in the future.
Jennifer (10:30):
It's been a pleasure to be here today.
Jim, thank you so much.
Jim (10:33):
Presented by ADP, HRpreneur focuses on the entrepreneurs and
business drivers who are shaping thegrowth of their companies and positively
impacting the lives of their employees.
With each episode, webring the experts to you.
We answer your questions and helpyou think beyond today so you can
discover more success tomorrow.
As always, thanks for listening to HRpreneur.
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