SimpleHR Today Blog

The One Big Beautiful Bill Act (OBBA)

No tax on tips or overtime — temporarily. For tax years 2025–2028, employees in qualifying roles can deduct their FLSA overtime premium pay and tip income from federal taxable income. This is a sunset provision, not permanent law.

Overtime deduction details: Only the FLSA overtime premium (the extra "half" in time-and-a-half) qualifies. Caps are $12,500 for single filers and $25,000 for joint filers. Voluntary overtime policies and CBA-required overtime are excluded. Qualified overtime must be reported on Form W-2, Box 12, Code TT.

Tip Deduction Details: Applies to employees in 68 IRS-defined tipped occupations (including food & beverage, hospitality, and personal services) and is capped at $25,000 per year; it does not include mandatory service charges or automatic gratuities, and employees generally cannot "double-dip" by claiming both tip and overtime deductions on the same income, so within the same workweek income must be carefully categorized to avoid overlap—employees are encouraged to consult their tax accountant.

Bigger childcare credits: The employer-provided childcare credit increased to up to $500,000 (up from $150,000), covering 40% of qualified expenses. A new calculation method lets employers base the credit on premiums paid for paid leave insurance — not just actual leave taken.

Higher immigration costs: Fees for asylum, parole, and TPS applications have increased. Employers sponsoring overseas workers should adjust their budgets accordingly.

Action items: Separate FLSA and non-FLSA overtime in payroll, map tipped roles to IRS qualifying categories, update W-2 reporting, and consult your SimpleHR team on benefits optimization.


Wage & Hour: What's Changed

White collar salary threshold: Still on pause. The Biden-era increase has been stayed and is not being actively pursued by the current DOL. No increase is expected anytime soon.

DOL enforcement posture: The Department of Labor (now rebranded as the "Department of Labor and Training") is emphasizing education and voluntary compliance over penalties. Liquidated damages are being waived in many audit cases. That said, some investigators are still pursuing audits aggressively — don't mistake a friendlier tone for a free pass.

Joint employment: This administration applies a narrower standard, making it less likely that related entities will be found to be joint employers.


Florida-Specific Updates

Minimum wage: $14.00/hour as of January 1, 2026 — increasing again to $15.00/hour on September 30, 2026.

Tip credit: Remains at $3.02/hour. Tipped minimum wage is currently $10.98/hour. Overtime for tipped employees must be calculated as: (Full Minimum Wage × 1.5) − Tip Credit = Overtime Rate. For January 2026: ($14.00 × 1.5) − $3.02 = $17.98/hour. Several payroll providers have been getting this wrong — verify your calculations.

Third-party vendor compliance: Don't assume your payroll processor or background check vendor is keeping up. Most contracts put compliance liability on the employer. Forms and practices more than a few years old may no longer be current.


Independent Contractor Classification

The current administration has reverted to the "economic reality test", but the core risk factors haven't changed. Watch for:

• Workers performing duties integral to your core business
• Workers who have worked exclusively for your company for an extended period
• Workers following the same schedule and supervision as your employees

Employees and contractors can take wage claims directly to court without involving the DOL — and if they win, you pay their attorney's fees. These cases almost always settle. When in doubt, classify as an employee. Document all contractor relationships with a signed agreement that explicitly states the classification and waives employment benefits.

EEOC: Fewer Lawsuits, Shifting Priorities

The EEOC filed just 93 merit lawsuits in 2025 — the lowest in roughly 30 years. Of those, 37 involved sex and pregnancy discrimination (10 under the Pregnant Workers Fairness Act) and 11 involved failure to accommodate religious beliefs.

The administration has largely stepped back from disparate impact enforcement — the theory that neutral policies can be discriminatory if they disproportionately affect a protected class. Note that private plaintiffs can still bring these claims independently.

We're Here to Help

Keeping up with changing employment law is a full-time job — and it shouldn't have to be yours. SimpleHR's certified HR professionals and payroll specialists stay current so you can stay focused on your business. Contact us today to make sure your practices are up to date.