November 6th, 2025
The new tax provisions introduced under the One Big Beautiful Bill (OBBB) Act create a transformative shift for restaurant operators by making several major tax advantages permanent beginning in 2025. These changes solidify long-term deductions such as full equipment expensing, the 20% small-business tax deduction, and EBITDA-based interest deductions while also introducing substantial tax relief for tipped and overtime-earning restaurant workers.
Together, these updates offer restaurants greater financial predictability, stronger cash-flow flexibility, and meaningful implications for staffing, investment planning, and day-to-day operations.
The law permanently extends full equipment expensing, the 20% small-business deduction, and EBITDA-based interest deductions starting in 2025.
Restaurants gain immediate cash-flow relief through 100% expensing of capital equipment purchases.
Tipped workers receive up to $25,000 in tax-free tip income, significantly increasing take-home pay.
Non-exempt employees receive up to $12,500 in tax-free overtime premium pay starting in 2025.
New credits and incentives for child care, housing, paid leave, and rural investment may indirectly benefit restaurant operators and employees.
The OBBBB marks a major shift by making several previously temporary tax advantages permanent beginning in 2025. This long-term clarity allows restaurant operators to plan confidently for equipment purchases, financing decisions, and expansion.
1. 20% Small Business Tax Deduction (199A)
Restaurants structured as pass-through entities such as LLCs, S-corps, or sole proprietorships retain access to a 20% deduction on qualified business income. This directly reduces taxable income and improves year-over-year financial stability.
2. Full Equipment Expensing (100% Immediate Write-Offs)
Restaurants can deduct 100% of the cost of eligible equipment immediately rather than spreading deductions over years.
This is especially valuable for:
Example:
A new commercial oven costing $20,000 can be fully deducted in the year it’s purchased, giving operators instant tax relief and improving cash flow.
3. EBITDA-Based Interest Expense Deductions
The law permanently restores the ability to deduct interest expenses based on EBITDA rather than EBIT.
This results in more generous deductions for operators who:
This change lowers the taxable income of leveraged restaurants and encourages growth and expansion.
OBBB Act has a substantial impact on how income is taxed for tipped and hourly restaurant workers. These worker-focused provisions indirectly affect hiring, scheduling, and compensation models within restaurants.
1. No Federal Income Tax on Tips (Up to $25,000)
The first $25,000 in tip income becomes exempt from federal income tax starting in 2025.
This may create stronger competition for front-of-house roles, which restaurants should anticipate as part of their staffing strategy.
2. No Federal Income Tax on Overtime Premium Pay (Up to $12,500)
Non-exempt restaurant employees who earn overtime will have up to $12,500 of their premium OT pay treated as tax-free.
This supports workers who rely heavily on evening and weekend shifts to make up income.
The One Big Beautiful Bill Act brings long-awaited stability to restaurant taxation by making key deductions permanent and introducing major income-tax relief for tipped and hourly workers. Restaurants now benefit from stronger cash-flow flexibility, more accessible financing opportunities, and predictable long-term tax rules that encourage investment and growth.
At the same time, worker-focused tax incentives will influence restaurant labor markets, compensation models, and staffing patterns. Together, these changes form a highly significant shift that every operatorf should understand and integrate into their operational and financial planning.
It allows restaurants to deduct the entire cost of equipment purchases immediately, improving cash flow and supporting faster upgrades and expansions.
Yes, workers must continue reporting all tips, and tips remain subject to Medicare and Social Security taxes; only federal income tax treatment changes.
