By Max Wengroff, Senior Manager, Government Relations

On July 4, President Trump signed the One Big Beautiful Bill Act into law. The legislation extends provisions of the 2017 Tax Cuts and Jobs Act (TCJA), eliminates taxes on tips for and overtime pay for some earners, boosts funding for immigration enforcement and national defense, and rolls back numerous green energy tax credits established under the Inflation Reduction Act. To offset the cost of these tax cuts and spending increases, Congress approved reductions to Medicaid coverage and the Supplemental Nutrition Assistance Program (SNAP).

Extension of Tax Cuts and Jobs Act Provisions

The bill extended numerous personal and business tax provisions instituted by the TCJA. Three of the biggest tax benefits for independent grocers  in the bill included the permanency of Section 199A pass-through deduction, 100% bonus depreciation, and an increase in the death tax exemption to $15 million. This improves upon the2017 version of these provisions, which were set to sunset at the end of 2025.  

The bill also makes the 2017-enacted individual tax brackets permanent and increases the standard deduction to $26,625 for heads of household and to $15,750 for all other filers.

Business Tax Cuts

Additional business tax cuts include a restoration of the EBITDA business interest deduction, an increase of the Section 179 small business expense deduction from $1 million to $2.5 million, an enhancement of the Employer-Provided Child Care credit from 25% to 40% and indexes it to inflation, and an extension and enhancement of the Paid Family and Medical Leave credit.

Personal Credits

A major hurdle for Republican lawmakers was negotiating a state and local tax (SALT) deduction cap. Blue state Republicans (Republican House members in New York and California, especially) were pushing for a permanent SALT cap of $40,000, an increase from the $10,000 it was previously set at, but worth noting, there was no cap on this deduction before 2017. The new cap is set to expire and revert to $10,000 in 2030. 

Campaign Promises

Two of the president’s central campaign promises, tax-free tips and tax-free overtime, made it into the bill as well. The no-tax-on-tips provision creates an above-the-line deduction for qualified tips of up to $25,000. Qualified tips are voluntary cash or charged tips received from customers or through tip sharing. By October 2025, the IRS will publish a list of occupations that “customarily and regularly” receive tips. This list will be used to determine eligibility for the deduction. Additionally, the deduction phases out when the taxpayer’s modified adjusted gross income exceeds $150,000 (double in the case of a joint return).  

The -tax-on-overtime provision allows individuals who receive qualified overtime pay, as detailed in Section 7 of the Fair Labor Standards Act, to deduct up to $12,500 (double for joint returns) in overtime pay. Similar to the no tax on tips provision, this deduction phases out when the taxpayer’s modified adjusted gross income exceeds $150,000 (double in the case of a joint return). Both provisions are effective for tax year2025 and sunset after 2028.

Termination of Green Energy Tax Credits

In addition to cuts to Medicaid and SNAP, Congress terminated many of the green energy tax credits established by the Inflation Reduction Act to offset the tax cuts and funding increases in the One Big Beautiful Bill. Credits, including the previously owned clean vehicle credit, the clean vehicle credit, the qualified commercial clean vehicles credit, and the alternative fuel vehicle refueling property credit, will sunset after this current tax year. The energy efficient commercial buildings deduction sunsets June 30, 2026.

Final Thoughts

Unfortunately, another NGA priority, the extension and enhancement of the work opportunity tax credit (WOTC), was not included in the bill. There has been some discussion of an end-of-year tax extenders package that would include WOTC, but that package would need to be bipartisan, and there is not much appetite for bipartisanship. However, NGA and our coalition partners will continue to advocate for extending WOTC beyond its December 2025 expiration. 

Overall, the tax provisions and certainty contained within the bill represent massive wins for independent grocers and Main Street businesses everywhere.