The One Big Beautiful Bill Act (OBBBA) was enacted into law, with President Donald J. Trump signing the legislation on Friday, July 4, 2025. The vote in the Senate was extremely narrow, but the House was less so, with various members' objections ultimately subsumed within the drive to pass by the target deadline set forth by the President.
Due to the narrow margin of the Senate vote, as well as the compressed amendment process, followed rapidly by the House vote and presidential signature, the final version of the legislation will require careful study and analysis over the coming days and weeks for taxpayers to fully understand what the various final provisions mean for them. Also, as in past instances, the U.S. Treasury will begin the process of writing regulations to interpret the legislation, a process that usually takes years.
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Much of the impetus for this legislation was maintaining the legacy of the Tax Cuts and Jobs Act (TCJA) of 2017. In the TCJA legislation, many provisions were permanent; however, many were not and subject to expiration at the end of 2025. As a result, much of the “headline” cost and importance of OBBBA was taken up by maintaining the status quo.
That said, the broad strokes of the legislation, from a tax standpoint, are fairly clear. This update will provide a list of generally applicable provisions to those in the restaurant industry. We will release more specific updates on provisions applicable to different taxpayers.
Read on for an overview of a number of key tax provisions that will impact restaurant owners.
Previously, the TCJA introduced a 20% deduction on qualified business income for pass-through entities like partnerships and S corporations under Section 199A. Restaurant owners with taxable income below $394,600 (married filing jointly) or $197,300 (single filers) in 2025 (adjusted annually) could fully claim this deduction. For those above these thresholds, limitations based on wages or assets apply. This provision, which enhances cash flow by effectively reducing tax rates, was set to expire on Dec. 31, 2025.
As signed into law, the Section 199A deduction of 20% is now permanent.
Previously, the TCJA expanded bonus depreciation to 100% for qualifying property (e.g., kitchen equipment), which includes qualified leasehold improvements, placed in service from Sept. 27, 2017, to Dec. 31, 2022. The deduction was phased down to 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. This provision encouraged capital investments by reducing taxable income and increasing net cash flow to restaurant owners.
As signed into law, 100% bonus depreciation is available for capital expenditures acquired after Jan. 19, 2025, forward. 100% bonus depreciation is now made permanent.
Previously, the TCJA capped net business interest deductions at 30% of Adjusted Taxable Income, impacting debt-heavy restaurant owners. Adjusted Taxable Income is generally defined as Earnings Before Interest and Taxes (EBIT). Small businesses with average annual gross receipts of $31 million or less in 2025 (adjusted for inflation) are exempt. Those restaurant owners exceeding this threshold face challenges deducting interest expenses, particularly in the current high-interest-rate environment. This provision was permanent, though small business exemptions persist.
As signed into law, the definition of Adjusted Taxable Income will now be defined as Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). The interest expense limitation would still be limited to 30% of Adjusted Taxable Income; however, with a higher threshold amount based on this Adjusted Taxable Income definition, many restaurant owners will be allowed an increased interest expense deduction for 2025 forward, as this provision was now made permanent.
One of the revenue raisers related to the bill included cutting off Employee Retention Credit refund payments for any claims related to Q3 2021 and Q4 2021 filed after Jan. 31, 2024. This still allows for previous refunds filed after Jan. 31, 2024, where the statute of limitations was still open. Many restaurant taxpayers had filed for refund claims after this new cutoff period, so good news for those taxpayers.
In addition to the revised provisions mentioned above, this bill would also introduce a handful of new concepts important to the restaurant industry.
No Tax on Tips exempts tipped workers from the federal income tax as long as they are not considered “highly compensated employees.” The benefit begins in 2025 and terminates at the end of 2028. No Tax on Tips will be an above-the-line deduction of tipped income up to $25,000 per year per taxpayer. The deduction begins to phase out for single filers with modified adjusted gross income above $150,000 (or $300,000 for joint filers). The FICA Tip Credit is preserved for restaurants and extended to the beauty and salon industry to support tip reporting.
No tax on overtime starts in 2025 and terminates at the end of 2028. As signed into law, qualified overtime pay eligible for tax-free treatment is capped at $12,500 per year (or $25,000 for joint filers). The above-the-line deduction begins to phase out for single filers with modified adjusted gross income above $150,000 (or $300,000 for joint filers).
A handful of common federal tax credits generally taken by restaurant operators were not addressed in this bill. Should these provisions expire, it would be detrimental to the restaurant industry.
This program provides a federal tax credit to hire and train individuals with barriers to employment, and unfortunately, it was not included in the broader reconciliation deal. The WOTC will need bipartisan action in late 2025. If no action is taken, WOTC will expire effective Dec. 31, 2025.
This is a credit paid to employees who live and work in certain low-income communities. Like WOTC, this provision is set to expire on Dec. 31, 2025. The proposed legislation did not address EZ and will need bipartisan action by late 2025 to extend the credit.
For additional provisions contained in OBBBA, please refer to this GBQ article.
If you have questions about how this bill could impact you or your business, contact Kaz Unalan, Ryan Kilpatrick, or your GBQ advisor.
By Kaz Unalan, CPA, CEPA, and Ryan Kilpatrick, CPA, CCIFP, Tax and Business Advisory Services
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