New Law. New Obligations. How H.R. 1 Impacts Your Payroll, Benefits & Tax Strategy

On July 4, 2025, H.R. 1 — “The One Big Beautiful Bill Act” — was signed into law, ushering in extensive changes for employers. With many provisions retroactively effective to January 1, 2025, this legislation significantly impacts your payroll, tax strategy, and employee benefits. Employers must act now to ensure compliance and unlock potential financial advantages.

The Challenge

Sweeping tax reform often brings more questions than answers. H.R. 1 affects:

• Standard deductions

• Overtime taxation

• Tip income treatment

• Family leave and childcare tax credits

• Research & development expensing

• Payroll reporting and policy compliance

For employers, this means more than just adjusting W-2s — it requires a comprehensive review of compensation, benefit eligibility, and compliance strategy.

Key Provisions Employers Should Know

• Tax Rates Made Permanent – Individual tax rates and standard deductions from the 2017 TCJA are now permanent, with a new $6,000 deduction for seniors through 2028.

• SALT Cap Increased – The state and local tax deduction cap increases to $40,000 for 2025–2029 (with phase-outs for high earners).

• New Income Tax Deductions – Employees may deduct up to $12,500 in qualified overtime and $25,000 in qualified tips from federal income taxes.

• Trump Accounts Introduced – Tax-free savings accounts for children born between 2024–2029, with government seed contributions.

• R&D Expensing Restored – Small businesses may now immediately deduct domestic R&D expenses, retroactive to 2021.

• ERTC Program Ended Early – Claims for Q3/Q4 2021 filed after January 31, 2024, will no longer be processed. IRS audit window extended to six years.

• Family Leave Credit Expanded – Applies to employees with 6+ months of tenure and includes employer-paid premiums on qualifying policies.

• Childcare Tax Credit Increased – Annual limits rise to $500,000 for large employers and $600,000 for qualifying small businesses. Pooled childcare is now permitted.

• Business Meals & Transit Changes – Meals aboard fishing vessels are now fully deductible; bicycle commuting benefits permanently removed.

How It Impacts You

This isn’t just an HR update — it’s a strategic business opportunity. These changes:

• Affect payroll configurations

• Require employee communication and policy updates

• Offer tax planning opportunities

• Trigger new compliance requirements

Employers should prepare now to avoid compliance risks and capitalize on credits and deductions.

Turn Compliance into Competitive Advantage

At Employer’s Guardian, we help you interpret and implement legislative changes with clarity and confidence. Our teams are actively supporting clients through payroll adjustments, benefit evaluations, and compliance strategy.