When the One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025, it brought sweeping reform across tax and benefits provisions – many of which carry significant implications for employers and employees alike. Read on to explore some of the changes impacting employer-sponsored benefits as a result of the OBBBA.
Limited Expansion of Tax Deductibility for Employee Meals
Current law stipulates that an employer’s food and beverage expenses for meals provided to employees through an eating facility or that meet the requirements for de minimis fringe benefits in the workplace are limited to a 50% deduction of the expense, and no deduction is allowed after 2025. This continues to be the case, but the OBBBA does introduce two targeted exceptions, particularly for employers operating in extreme or remote areas.
Meals furnished on certain fishing vessels or at fish-processing facilities – located in the U.S., north of 50 degrees north latitude, and not located in a metropolitan statistical area – are now 100% tax deductible, up from 50% previously.
Upgrades Made to Employer-Provided Childcare Benefits
Substantial upgrades have been made to tax incentives specifically for employers providing childcare. Effective for amounts paid or incurred after Dec. 31, 2025, the employer-provided childcare tax credit:
- Increases from 25% to 40% of qualified childcare expenses, or 50% for qualifying small businesses.
- Raises the annual credit cap from $150,000 to $500,000, and to $600,000 for eligible small businesses.
These enhanced incentives offer employers a powerful tool to support working parents, reduce absenteeism, and increase retention.
Employee Education-Related Benefits Adjusted
Also included in the OBBBA are provisions impacting education-related benefits:
- Under current law, the first $5,250 of employer-provided educational assistance is excluded from an employee’s gross income. Going forward, the maximum annual dollar amount will be tied to cost-of-living adjustments (COLA), and this tax-free educational assistance will now permanently cover student loan repayment. Previously set to expire in 2025, the ability to apply this benefit toward student loan repayment is now a permanent feature of Section 127.
- Qualified expenses for use of 529 plan funds have been expanded to include continuing education, licensing, tutoring, and dual enrollment courses for high school students.
As a result of these adjustments, employers can offer tax-efficient student loan repayment benefits as a permanent, high-value attraction and retention lever. In addition, upskilling and credentialing can now be supported by 529 plans, unlocking a new avenue for professional development and talent pipeline enhancement.
Technical Updates Made to Parking Benefits
The OBBBA does not change the fundamental tax-free treatment of qualified parking for employees, and qualified parking remains an excludable fringe benefit. However, it does remove bicycle-reimbursement references, clean up coordination rules, and change the inflation-adjustment base year from 1998 to 1997. These adjustments are effective for tax years beginning after Dec. 31, 2025.
In addition, the OBBBA cleans up wording and structure surrounding employer deduction disallowance rules for transportation fringes – but does not create a new employer deduction relevant to this provision.
Explore the Full Impact of the One Big Beautiful Bill Act
The changes made to employer-sponsored benefits by the One Big Beautiful Bill Act create opportunities for organizations to reinvest in their most valuable asset – their people. Partnering with an experienced advisor will be key to navigating these transitions smoothly. Connect with our team at CBIZ to help ensure your organization is prepared to adapt.
If you want to learn more about the full impact of the One Big Beautiful Bill Act, explore our dedicated resource center.
© Copyright CBIZ, Inc. All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. Material contained in this publication is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their organization.
“CBIZ” is the brand name under which CBIZ CPAs P.C. and CBIZ, Inc. and its subsidiaries, including CBIZ Advisors, LLC, provide professional services. CBIZ CPAs P.C. and CBIZ, Inc. (and its subsidiaries) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. CBIZ CPAs P.C. is a licensed independent CPA firm that provides attest services to its clients. CBIZ, Inc. and its subsidiary entities provide tax, advisory, and consulting services to their clients. CBIZ, Inc. and its subsidiary entities are not licensed CPA firms and, therefore, cannot provide attest services.