In 2025, the One Big, Beautiful Act (OBBA) dominated headlines nationwide. As we approach 2026, the OBBA is poised to continue making waves, especially in the world of employment law. Employers and employees alike must prepare for a sweeping set of federal employment and tax law changes introduced under the OBBBA and related IRS guidance. The 2026 One Big, Beautiful Bill Act updates touch nearly every corner of the workplace, from employee benefits and compensation reporting to paid leave, overtime, and tip deductions. Against a backdrop of rapid federal policy shifts and increasingly complex state-level requirements, compliance is becoming more demanding. At the same time, employees will see expanded rights and new opportunities that require careful understanding to fully realize their benefits.
The overview below highlights the most significant OBBBA provisions and regulatory updates taking effect in 2026, when they apply, and why they matter for today’s workplace.
Related Article: New California Employment Laws in 2026: What Employers & Employees Need to Know
2026 One Big, Beautiful Bill Act Updates That Are Poised to Impact the Workplace
| Employment Law Updates | About the 2026 One Big, Beautiful Bill Act Updates | When They Go Into Effect |
| Bronze and catastrophic plan allowance in connection with HSAs | Bronze and catastrophic plans purchased through an exchange are now considered high-deductible plans; people enrolled in them are eligible to contribute to a health savings account (HSA). | All months beginning after 12/31/25 |
| Direct Primary Care Service Arrangements | Certain “direct primary care” arrangements are no longer treated as disqualifying coverage when coupled with a high-deductible health plan. This update allows contributions to an HSA if the individual is simultaneously covered by a high-deductible plan and a direct primary care arrangement. | All months beginning after 12/31/25 |
| Dependent Care Assistance Plan Limit Increase | Increased the benefit limit to $7,500 when filing as single or married filing jointly ($3,750 married filing separately). | Plan years beginning after 12/31/25 |
| Exclusion for Employer Payments of Student Loans | Permanently permits employers to make student loan reimbursement payments. | All payments made after 12/31/25 |
| Termination of Qualified Bicycle Commuting Reimbursement | Removes the exclusion for the qualified bicycle commuting reimbursement. | Tax years beginning after 12/31/25 |
| Moving Expense Limitation Extension | Removes the exclusion for employer-provided qualified moving expense reimbursements (with some exceptions) and the deduction for moving expenses. | Tax years beginning after 12/31/25 |
| Deduction Limitation for Excessive Employee Remuneration | Code Section 162(m) limits the deduction for certain employees for remuneration above $1 million; aggregation rules will begin applying for purposes of the limitation and the allocation of the deduction. | Tax years beginning after 12/31/25 |
| Expansion of Excise Tax Application on Excess Compensation within Tax-Exempt Organizations | Code Section 4960 excise tax rules covering certain tax-exempt organizations that pay over $1 million in remuneration now apply with respect to any employee or former employee of the tax-exempt organization, not just select covered employees. | Tax years beginning after 12/31/25 |
| The OBBBA Makes Permanent and Expands the Tax Credits Employers May Take for Payments for Paid Family and Medical Leave (PFML) | First allowed under the TCJA temporarily, now to qualify for the tax credit, employers must pay employees with 6 months of service and who are employed 20 hours per week at least 50% of their normal wage while on leave for 2-12 weeks per year. | Tax years beginning after 12/31/25 |
| Clarification of Employer and Payor Reporting Obligations Related to Deductions for Qualified Tips and Qualified Overtime | Building on Notices issued in 2025, the guidance provides clearer definitions, particularly for qualified overtime, and signals that employers and payors should prepare payroll and reporting systems to align with forthcoming Forms W-2 and 1099 requirements; employers and payors should also consider whether to provide supplemental information to workers to support their deductions. | Tax years beginning after 12/31/25 |
| Notice 2025-69 – Transition Relief for Tipped Workers | Until final regulations are issued, the IRS will treat workers in occupations that customarily received tips on or before December 31, 2024, as meeting this requirement and will not require employers to report specified trade or business status on Form W-2. | Effective for payments subject to reporting beginning in 2026 and until final regulations are published. |
| Notice 2025-69 — Definition of Qualified Overtime | Notice 2025-69 clarifies what constitutes “qualified overtime” for purposes of the deduction by limiting it strictly to the additional one-half portion of overtime pay required under the FLSA. Overtime paid solely under state law, collective bargaining agreements, or at rates exceeding the FLSA minimum (such as double time) does not qualify, and only FLSA-required overtime must be tracked and reported; the notice also confirms that certain non-employees for tax purposes who are covered employees under the FLSA must have qualified overtime reported on Form 1099. | Effective for reporting beginning with payments made in 2026. |
Related Article: One Big, Beautiful Act Update & What It Means for Our Nation’s Employment Laws
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As 2026 approaches, the One Big, Beautiful Bill Act and related IRS guidance make one thing clear: employment and tax compliance is no longer a “set it and forget it” exercise. These updates demand proactive planning, cross-functional coordination, and a clear understanding of how federal changes intersect with evolving state laws. Employers that act now can reduce risk, avoid costly missteps, and position themselves to adapt smoothly, while employees who understand these changes are better equipped to protect and exercise their rights. Clear, accurate communication around these 2026 One Big, Beautiful Act updates is essential for everyone.
If your organization, media outlet, or professional audience needs timely, practical insight into how the 2026 OBBBA updates will shape the modern workplace, I’m available to break down the law, clarify the impact, and bring these issues to light.
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This communication is not legal advice. It is educational only. For legal advice, consult with an experienced employment law attorney in your state or city.