The One, Big, Beautiful Bill Act (OBBBA), signed on July 4, 2025 (P.L. 119-21), is a tax overhaul providing significant relief for salary and hourly employees, including a federal income tax deduction for qualified overtime pay up to $12,500 ($25,000 for married filing jointly) and "No Tax on Tips" for 2025–2028. It also raises the standard deduction for 2026.
The Act permits eligible non-exempt employees to deduct the premium portion of overtime pay from their federal taxable income. Specifically, when an employee receives time-and-a-half pay for overtime work, only the additional “half” portion is deductible.
1099-MISC thresholds changes in One Big Beautiful Bill Act
The OBBBA raises the reporting threshold for Form 1099-MISC to $2,000 from $600 starting in tax year 2026. This is the first major update to the 1099-MISC threshold in decades and is intended to reduce paperwork for both payors and recipients.
The "new rule" for salaried workers refers to the U.S. Department of Labor's (DOL) 2024 overtime rule, which significantly raised salary thresholds for exempt status (making more lower-paid salaried workers eligible for overtime) but was largely vacated by a federal court in November 2024, meaning the scheduled increases to $43,888 (July 1, 2024) and $58,656 (Jan 1, 2025) were blocked. While the original 2019 salary threshold of $35,568 ($684/week) temporarily rose to $43,888 in July 2024 before being blocked, the rule is currently on hold, with no new automatic triennial updates planned, and the existing $35,568 threshold largely remains in effect, though state laws (like California's) may have higher requirements.
1, The One Big Beautiful Bill Act (the Act) contains a number of changes to employee benefits. These changes include, for example, enhancement of the employer-provided childcare credit and the elimination of the bike commuter reimbursement program.
The new law has a provision for "losses available to living affected individuals," which, among other things, allows recipients of workers' compensation benefits related to Manhattan Project waste to claim "additional compensation in the amount of all documented out-of-pocket medical expenses incurred as a result of ...
You can earn unlimited income on Social Security once you reach your Full Retirement Age (FRA), which varies by birth year but is 67 for those born in 1960 or later; before then, earnings limits apply, reducing benefits until you hit FRA, at which point the limit disappears entirely for retirement benefits.
The drawbacks of receiving salary pay include: No overtime: Companies are not required to pay overtime to salaried employees, although some do. If you work 60 hours in a week rather than just 40 hours, you may not be eligible for overtime pay or compensated for your time.
The National Living Wage for those aged 21 and over will rise from 1 April 2025 to £12.21 to reflect the cost of living under Labour's Plan to Make Work Pay.
As a result of The One, Big, Beautiful Bill, the top 1% will pay MORE in federal taxes than they did before TCJA – over 40% of all federal taxes. As a result of The One, Big, Beautiful Bill, the top 10% of earners' of federal taxes will INCREASE by 6.6% compared to what they paid before TCJA.
As of January 1, 2025, the federal minimum salary for exempt employees under the FLSA remains at $35,568 annually ($684/week), because a federal judge blocked the Department of Labor's (DOL) planned increase to $58,656, reverting the standard. However, some states, like Washington, have their own higher thresholds, with Washington's increasing to $69,305.60 (small employers) and $77,968.80 (large employers) in 2025, so it's crucial to check state laws.
OBBBA allows eligible workers to deduct "qualified overtime pay" on federal returns. The break is capped at $12,500 for single filers or $25,000 for married couples filing jointly. This tax break phases out for higher earners. This is a tax break only for overtime pay, not all wages.
Some of the major tax changes effective from April 1, 2025, are revised tax slabs, rebate of up to Rs. 60,000, revised ITRU deadlines, calculation of partner's remuneration allowable as a deduction and revised TDS/TCS threshold limits.
If an employer classifies an employee as exempt salaried, they are not legally obligated to have them clock in. However, implementing time tracking can promote proper employee classification and help avoid potential legal issues.
The "8/80 Rule" refers to two different concepts: a U.S. labor law exception for healthcare overtime, allowing time-and-a-half for hours over 8/day or 80/14-days for hospitals, and a project management guideline for task sizing (work packages) to be between 8 and 80 hours for effective tracking, preventing excessive detail or overly large chunks of work. Both involve a range (8 to 80) but serve distinct purposes in payroll and project planning.
To calculate time using the 7-minute rounding rule: Look at the minutes past the quarter-hour. If it's 0-7 minutes, round down to the quarter-hour. If it's 8-14 minutes, round up to the next quarter-hour. For example, 8:07 AM rounds to 8:00 AM, while 8:08 AM rounds to 8:15 AM.