Look, I get it.
The last thing you want to think about is tax law.
But we need to talk about the ‘One Big Beautiful Bill Act’ (OBBBA). It’s been heralded as a landmark tax reform, with some groups praising its impact on restaurants.
The reality is far more nuanced.
Most accountants who specialize in the restaurant industry agree that while there are some positive aspects, the bill’s benefits aren’t universally transformative.
These are specific, immediate changes to the tax code that directly impact how much you pay in federal income tax, how your tips are treated, and how your business expenses get deducted.
So grab a coffee (or whatever gets you prepped for the dinner rush), and let’s break down exactly what the One Big Beautiful Bill Act means for your restaurant tax strategy.
Key Takeaways
Action items for restaurant owners:
- Audit your tip reporting now: Make sure all employee tips are properly documented on W-2s and Forms 4137 to maximize the $25,000 annual tip deduction (effective 2025-2028)
- Review your overtime tracking: Ensure overtime premiums are separately reported on payroll forms so employees can claim up to $12,500 in overtime deductions and stay motivated for extra shifts
- Evaluate your business structure: If you’re a pass-through entity (LLC, S-Corp, partnership), the permanent 20% QBI deduction with expanded income thresholds could save you thousands annually
- Document employee meal expenses: Keep detailed records of shift meals and employee cafeteria costs since restaurants maintain full deductibility while other industries lose this deduction in 2026
- Connect with a restaurant-specialized CPA: These complex changes require expertise to implement correctly and capture maximum savings—don’t leave money on the table with a generalist accountant
What Is The One Big Beautiful Bill Act
The “One Big Beautiful Bill Act” (officially known as H.R. 1) is a massive tax and spending package that was signed into law by President Trump on July 4, 2025.
The bill permanently extends the individual tax rates the president signed into law in 2017, which were originally set to expire at the end of 2025.
But it goes way beyond just keeping the old tax cuts. The legislation would make most of the tax cuts permanent, while increasing spending for border security, defense, and energy production.
When Did It Go Into Effect?
The House bill passed in a 218 to 214 vote on Thursday, July 3 after the Senate version narrowly approved the bill two days prior in a 51-50 vote, and President Trump signed the bill into law on Friday afternoon, July 4, 2025.
Most of the tax changes are already in effect for 2025, and some are even retroactive—meaning you could get money back for taxes you’ve already paid this year.
Why Should Restaurants Care?
Because there are provisions that impact you.
How?
No tax on tips. No tax on overtime. Better business expense deductions.
Let’s get into it.
Restaurant Owner-Focused Benefits and Their Impact
This new tax bill has a lot going on, some of which can benefit restaurant owners.
Let’s take a look at the most important ones.
Business Interest Expense Deduction
If you’ve got loans for equipment, renovations, or working capital, this change is going to be important for you.
The One Big Beautiful Bill Act restores the Tax Cuts and Jobs Act’s original, more favorable EBITDA-type calculation of the business interest deduction limit for tax years beginning in 2025
Translation: you can now deduct more of your business loan interest when calculating your federal income tax.
Under prior law, the deduction was limited and more restrictive. The new legislation brings back the better rules that let you deduct business interest expenses based on your earnings before interest, taxes, depreciation, and amortization (EBITDA) rather than just earnings before interest and taxes.
The provision is permanent and also provides specific rules for how the business interest expense limitation interacts with other tax provisions that capitalize interest. This kicks in for tax years beginning in 2025, so it’s already helping your bottom line.
What this means for your restaurant: if you have an auto loan for delivery vehicles, equipment financing for that new commercial oven, or a line of credit for cash flow, more of that interest becomes tax-deductible. This directly reduces your gross income for tax purposes, lowering what you owe the IRS.
Qualified Business Income Deduction
The Qualified Business Income (QBI) deduction just got a permanent upgrade, and if you’re pulling profits out of your restaurant as a pass-through entity, this is huge.
The One Big Beautiful Bill Act makes permanent the section 199A qualified business income deduction, with no change to the current 20% deduction percentage.
This means if your restaurant is structured as an LLC, S-Corp, partnership, or sole proprietorship, you can deduct 20% of your qualified business income from your individual income tax return.
The bill also expands the limitation phase-in window from $50,000 for single filers ($100,000 for married filing jointly) to $75,000 for single filers ($150,000 for married filing jointly).
What does this mean? More restaurant owners will now qualify for the full deduction before it starts phasing out. The QBI deduction reduces your taxable income, which directly lowers your federal income tax liability.
The change is already in effect for 2025 and is permanent, so you don’t have to worry about this tax relief disappearing in a few years.
Here’s how this impacts your tax code situation: If your restaurant generates $200,000 in qualified business income and you’re married filing jointly with adjusted taxable income under the new threshold, you can deduct $40,000 (20% of $200,000) from your individual income tax return.
In the 24% tax bracket, that’s $9,600 in tax savings annually.
For small businesses like restaurants operating on tight margins, that’s real money that can go back into capital investment, employee compensation, or just keeping more of what you’ve earned.
Bonus Depreciation and Section 179 Expensing
Restaurants can now take advantage of permanent 100% bonus depreciation for qualified assets.
Section 179 limits have also been expanded to $2.5 million, making it easier for restaurant owners to write off things like:
- Major equipment purchases
- POS upgrades
- Rennovations
As long as it’s done in the year they are placed in service. This provision is especially valuable for restaurants investing in modernization or expansion.
Meal Deductibility
The One Big Beautiful Bill Act amends the TCJA rule, effective for 2026, that will disallow deductions for various expenses related to on-premises employer-provided meals, so that certain businesses will be exempt from the disallowance.
Translation: restaurants get to keep deducting employee meals.
Here’s what was supposed to happen. Starting in 2026, the Tax Cuts and Jobs Act was going to eliminate your ability to deduct employee meals as a business expense. So those shift meals you provide to kitchen staff, the discounted employee cafeteria, meals for servers working doubles—none of that would be tax deductible anymore.
The OBBBA provides relief from the meal expense deduction disallowance for certain restaurant and fishing industry employers. Basically, restaurants got carved out of this rule.
This takes effect for 2026, which means you keep your current meal deductions instead of losing them. No new paperwork, no complicated rules, just business as usual.
Estate Tax Relief
The One Big Beautiful Bill Act permanently increases the estate tax exemption and lifetime gift tax exemption amounts to $15 million for single filers ($30 million for married filing jointly) in 2026 and indexes the exemption amount for inflation after that, preventing the often-overwhelming tax hurdles that force families to sell or close a restaurant rather than the next generation continuing to operate it.
Under the Tax Cuts and Jobs Act, the exemption was scheduled to sunset at the end of 2025, which would have cut the exemption roughly in half to around $7 million per person. The new law increases the exemption from the TCJA’s temporary $10 million exemption that was adjusted for inflation to $13.99 million in 2025 up to $15 million permanently.
The change is effective January 1, 2026, and comes with no expiration date.
So, if you’ve built a successful restaurant operation worth $10 million, including real estate, equipment, and business goodwill, your children could inherit it without facing federal estate taxes.
The bottom line?
This could reduce or even eliminate the estate tax burden for family-owned and multi-generational operations, ensuring smoother succession planning.
Employee-Focused Benefits And Their Impact
The OBBBA introduces tax deductions that directly benefit your employees.
While these provisions won’t reduce your business taxes, they can indirectly benefit your restaurant by improving staff morale, reducing turnover, and making it easier to attract workers.
No Tax On Tips
The one you’ve been waiting for.
This new tax bill allows employees and self-employed individuals to deduct qualified tips received in occupations that are listed by the IRS (the final list must be set by October 2, 2025) as customarily and regularly receiving tips on or before December 31, 2024.
Basically, your servers, bartenders, and other tipped staff can now deduct their tip income from their federal income tax—meaning they don’t pay federal income tax on those tips.
The qualified tips must be reported on statements furnished to the individual as required under various provisions of the Internal Revenue Code (such as the requirement to issue a Form W-2) or otherwise reported by the taxpayer on Form 4137. So this only works for properly reported tips, not cash tips.
The deduction is effective for 2025 through 2028, and it’s retroactive, meaning your staff could literally get a refund for tips they’ve already been taxed on this year.
Some technicalities:
- The maximum annual deduction is $25,000
- Phase-out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)
But here’s what you need to know as a restaurant owner: Your payroll taxes don’t change—you’re still paying the same FICA taxes on those tips. It’s just the federal income tax that gets eliminated for your staff.
This also means your servers are going to want to make sure all their tips are properly reported.
No more under-reporting cash tips, because now there’s a real tax benefit to reporting everything correctly.
No Tax on Overtime Pay
The One Big Beautiful Bill Act creates a new deduction for individuals who receive qualified overtime compensation, specifically the pay that exceeds their regular rate of pay, such as the “half” portion of “time-and-a-half” compensation.
So when your line cook works 50 hours and gets paid time-and-a-half for those extra 10 hours, they can now deduct the overtime premium from their federal income tax.
In order to be deductible, the payment must adhere to section 7 of the Fair Labor Standards Act, which states that the money is in excess of the regular rate at which the person is employed.
A.K.A., you have to report the overtime on a Form W-2, Form 1099, or other specified statement.
Just like with tips, this deduction takes effect for the 2025 tax year and is set to expire after the 2028 tax year.
And yes, it’s retroactive—so your staff will get money back for overtime worked in 2025.
Some technicalities:
- Maximum annual deduction is $12,500 ($25,000 for joint filers)
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)
Don’t be surprised if your staff is more motivated to pick up those extra shifts.
While these changes are generally seen as morale boosters for tipped and hourly employees, some non-tipped employees (cooks, dishwashers, etc.) could feel like they got the short end of the stick, creating internal equity concerns.
It’s a good idea to nip this in the bud by:
- Offering performance bonuses or other perks to non-tipped staff
- Communicating clearly about how these benefits work and who qualifies
- Exploring wage adjustments or shared incentive programs
What Restaurants Need To Do Now
To get the most from the OBBBA, consider the following:
- Reassess Debt and Interest: Work with your CPA to model potential tax savings using the new EDITDA formula.
- Plan Capital Investments: Take advantage of 100% bonus depreciation for any upcoming equipment or renovation projects.
- Confirm QBI Eligibility: Review your ownership structure and income levels to ensure you fully benefit from the 20% QBI deduction
- Enhance Payroll Processes: Ensure that tips and overtime pay are accurately tracked and reported.
- Support Non-Tipped Staff: Consider incentives or pay adjustments to maintain team balance.
- Stay Informed: Work with a restaurant-specialized CPA to navigate these changes effectively.
Wrapping Up
We just covered a lot of ground. No tax on tips, no tax on overtime, better business deductions, estate planning relief—there’s real money on the table.
But knowing about these changes and actually capturing the savings are two completely different things.
You’ve got a restaurant to run. You don’t have time to become a tax expert on top of everything else you’re juggling.
Want to work with someone who lives and breathes this stuff? Of course you do, because that means you don’t have to.
The accountants in The Restaurant CPAs network eat, sleep, and breathe restaurant tax law.
They know exactly how to maximize your savings from the One Big Beautiful Bill Act, how to structure your payroll to take advantage of the tip and overtime provisions, how to ensure everything is documented as it should be, and how to make sure you’re not leaving money on the table.
Get matched with a CPA who specializes in restaurants and knows exactly how to handle these new tax changes.
Because the last thing you want is to find out next April that you missed out on thousands in tax savings because your current accountant didn’t understand how new tax laws apply to restaurants.
