President Trump signed H.R. 1, known as the “One Big Beautiful Bill Act,” into law on July 4. The House of Representatives sent the bill to the President’s desk on a vote of 218 to 214. All 212 Democrats, joined by two Republicans, Reps. Thomas Massie of Kentucky and Brian Fitzpatrick of Pennsylvania, voted against passage.
Key employment provisions (See our website for a deeper analysis):
-
Temporary tax deduction for overtime: Individual employees may deduct up to $12,500 and married couples may deduct up to $25,000 of overtime wages for tax years 2025 through 2028. Employers must report the total overtime compensation on employees’ W-2 forms, which employees will need to substantiate their deduction.
-
Temporary tax deduction for tips: Employees in occupations where tipping is customary and regular may deduct up to $25,000 for qualified tips received for tax years 2025 through 2028. Within 90 days of enactment, the Secretary of the Treasury should publish a list of qualifying occupations.
-
Aggregate Rule for Executive Compensation: The new law introduces a controlled group aggregation rule for determining both the five highest-paid employees in a given year and the total compensation paid to specified covered employees. This provision takes effect for tax years beginning after December 31, 2025.
-
Expanded Health Savings Accounts: The new law significantly broadens HSA eligibility.
-
All bronze and catastrophic plans will be treated as HSA-eligible, effective for months beginning after December 31, 2025.
-
Effective for plan years beginning in 2025, individuals with HDHPs and HSAs are permanently allowed first-dollar coverage for telehealth services.
-
Patients with HDHPs and HSAs are permitted to enroll in Direct Primary Care (DPC) arrangements and use some HSA funds to pay for their DPC memberships.
-
Permanent Exclusion for Employer-Provided Student Loan Assistance and Inflation Adjustment: Makes permanent an employer’s ability to exclude the first $5,250 of employer-provided education assistance from an employee’s gross income and the ability to use educational assistance programs to make non-taxable contributions to an employee’s student loan repayments.
-
Enhanced Business Tax Credit for Paid Family Leave: Makes permanent the 2017 tax credits for employers that offer paid family and medical leave to employees caring for ill family members. Allows employers to offer the benefit to employees after six months of service, rather than the current one-year minimum service requirement.
-
Permanent Increase to ABLE Account Contribution Limits: Makes permanent the higher contribution limit that employees with disabilities may contribute to their ABLE retirement accounts and adds an additional year of inflation adjustments to the contribution threshold.
