The Big Beautiful Bill – What It Means for Your Business
Most have seen all the stories, discussion and lengthy debates emitting from Washington surrounding the Big Beautiful Bill, which has passed through the Halls of Congress and has received President Trump’s signature on the South Lawn of the White House surrounded by his chief allies from congress and architects of the sweeping legislature. Along with a volley of cheers from his supporters and the roar of the jet engines of Whitman Airforce Base overhead, the flashy ceremony to be complete with fireworks commemorating the 249th Birthday of the United States.
A grand event indeed to usher in a new set of laws in a mega-bill over 949 pages long. Facing staunch opposition from rival parties and factions of his own party, Trump’s congress was still able to pass this law through both Houses and make most of his campaign promises and existing tax cuts permanent.
While there are numerous elements to the Big Beautiful Bill, laws, rulings, regulations and cuts. I will summarize the main changes that will have the most significant effect your small business or future entrepreneurial endeavor.
No Tax on Tips:
This new change states individuals are now permitted to deduct up to $25,000 of income in the form of tips for single filers with an income up to $150,000 and joint filers up to $300,000 before phasing out on their yearly taxes moving forward.
In most cases this is regarded as good news for the service industry workers who in most cases get paid LESS than minimum wage in service jobs in states such as Florida. They can now earn what would be a majority of their salary essentially tax-free.
As a business owner, possibly employing individuals receiving tips, this can lead to a more stable employment environment in some instances, as staff has essentially received a +/- 20% raise (depending on tax bracket) off of a majority of their salary. With this change workers will be more inclined to stay in a position with such a payment structure as it now carries a new incentive.
There may be instances where a business owner can save by starting an employee on a lower hourly salary as they would be now collecting more take-home pay on tips up to the $25,000 threshold.
No Tax on Overtime:
This provision allows employees to deduct up to $12,500 for single filers with income up to $150,000 and $25,000 for joint filers with income up to $300,000 for qualified overtime pay.
This puts employers in an interesting position. As hourly staff now receive OT pay at time and a half plus it’s now tax free up to almost the entire standard deduction (raised in the bill to $15,750 of single filers) employees will undoubtedly be incentivized to collect as much as possible.
While most business owners shy away the paying of OT, they could save by structuring new employee contracts who might work in a profession where overtime work is more prevalent. As an example, lowering the natural hourly wage offsetting the higher overtime salary. By contrast, however, this can work as an incentive for getting more out of an existing work staff, having them stay longer at work and getting more done on a project or other task now carries the further added benefit of lower taxes on their overtime wage.
These new changes will all affect the US economy as a whole and put more emphasis on employee compensation. In the service industry we could see instances where a satisfied working staff will likely stay in roles longer and the changes may incentivize workers to take production-based jobs with a tip structure vs a steady lower hourly wage job. A majority of Americans are faced with these such decisions, as a business owner these changes may not affect you directly, however understanding them can help incentivize and motivate your employees and positively affect your bottom line.
To gain personalized guidance for your business on this topic and others contact us.
- Vince Calace
Founder - Venture Business Development