One Big Beautiful Bill Act (OBBBA): What HR and Employers Need to Know

On July 4, President Trump signed into law the One Big Beautiful Bill Act (OBBBA)—a sweeping legislative package that touches nearly every corner of public policy, from tax reforms and healthcare to workforce development and family benefits. While the name may sound grand (and let’s be honest, a little theatrical), the provisions packed inside have real and lasting implications for HR professionals, business leaders, and working families alike.

Let’s break down what this means for your workplace—without the jargon.

No Tax on Tips and Overtime? Yes, Really.

OBBBA introduces new deductions aimed at helping workers keep more of what they earn—especially those clocking in extra hours or working in tip-based roles.

• Tip Income Deduction: Workers earning under $150,000 ($300,000 for couples) can deduct their tips from taxable income. The benefit phases out gradually beyond those limits.
• Overtime Deduction: Eligible employees can deduct up to $12,500 in qualified overtime income ($25,000 for joint filers). The overtime must be clearly reported on W-2s and comply with FLSA rules. This tax break is available from 2025 through 2028.

Education Gets a Boost

Expanded 529 Plan Use

OBBBA broadens the definition of qualified education expenses, making 529 plans more versatile than ever. Now, families can use these savings for a wider range of educational programs—including short-term training and certain K–12 costs.

Workforce Pell Grants

In a nod to the changing nature of education and work, Pell Grants can now fund short-term, high-demand workforce training programs. To qualify, programs must run 150 to 600 hours over 8–15 weeks.

Helping Families Make Ends Meet

Student Loan Repayment—Now a Permanent Benefit

Remember the COVID-era rule allowing employers to help with student loan repayments tax-free? It’s here to stay. Under Section 127, employers can continue offering up to $5,250 annually to employees, tax-free, for student loan assistance.

Enhanced Child and Dependent Care Credit

Families with kids or dependents can access a larger tax credit, starting at 50%. It gradually phases out based on income but ensures that even higher-earning families retain at least a 20% credit.

Increased Dependent Care FSA Limits

Starting in 2026, employers can offer employees up to $7,500 annually in pre-tax dependent care benefits (up from $5,000). Married couples filing separately can claim up to $3,750 each.

Introducing “Trump Accounts” for Kids

Starting in 2025, all children born in the U.S. will receive a $1,000 federal contribution into a new type of savings account, informally called a “Trump Account.”

• Parents can’t touch the funds until the child turns 18.
• Employers can also contribute up to $2,500 per child, tax-free—if they set up a formal, non-discriminatory plan.
• Contributions are indexed starting in 2027.

This new benefit adds a unique dimension to family-oriented HR perks and may become a recruiting tool in competitive industries.

Health & Wellness Perks Get a Facelift

More Flexibility for HSAs

Good news for those enrolled in high-deductible health plans (HDHPs):

• HDHPs can now cover telehealth services before deductibles are met.
• All Bronze and Catastrophic ACA plans now count as HDHPs.
• Direct primary care arrangements are now HSA-eligible.

These changes kick in for plans starting January 1, 2026.

Paid Leave Tax Credit—Now Permanent

Employers who offer at least 50% pay during family and medical leave can now claim the federal tax credit permanently. This change gives employers long-term incentive to support employees during life’s critical moments—whether it's welcoming a new child or recovering from a medical issue.

Some Benefits Out, Others Adjusted

OBBBA also makes some cuts:

• Qualified bicycle commuting reimbursements are no longer tax-free after 2025.
• Other transportation-related benefits get one more year of inflation adjustment.

The One Big Beautiful Bill Act is more than just a flashy name—it’s a massive shift in how the government supports workers, families, and employers. For HR leaders, now is the time to assess your benefits programs, tax strategies, and workforce development policies.

From student loan repayment perks to new tax deductions and savings opportunities, OBBBA sets the stage for a more flexible, family-friendly, and financially supportive workplace landscape.

Need help decoding what this means for your company or employees? Stay tuned—we'll be unpacking specific sections in more detail over the coming weeks.