Key points covered in this article:

  • The One Big Beautiful Bill Act (OBBBA) allows up to a $25,000 deduction for qualified, voluntary tips received in certain occupations and up to a $12,500 deduction for qualified overtime compensation. Clubs may consider restructuring compensation practices to benefit employees.
  • 100% bonus depreciation is restored, and Section 179 expensing has been increased, positioning clubs to leverage tax savings for operational and capital upgrades.
  • Clean energy credits are being eliminated and phased out over various dates in 2025 and 2026. Clubs will want to prioritize green upgrades before the savings window closes.

Among the 525 pages of legislative text, the One Big Beautiful Bill Act (OBBBA) contains some of the most pro-taxpayer measures seen in recent years. Of the 102 provisions, many of them extend or modify tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) that were originally set to expire this year, effectively resolving the 2025 tax cliff and giving taxpayers months to digest the new law. The OBBBA also introduces a number of new deductions and makes permanent adjustments that will affect both individuals and business alike.

Private clubs and their employees are likely to feel the most immediate effects. With changes from the tax treatment of tip income and overtime pay to the full expensing of capital assets, clubs will want to start evaluating whether their current compensation strategies and systems are aligned with these provisions and what impact the current legislation may have on near- and long-term investment decisions.

While it may take some time to wade through the complexity of the legislation and determine how it directly applies, the OBBBA opens up immediate planning opportunities for private clubs and provides invaluable clarity for strategic decision making in the months ahead.

The following article breaks down specifics on how private clubs and their employees can leverage the OBBBA to favorably position their tax outlook and prepare for new reporting requirements.

Top Tax Headlines for Individuals

For individuals, the OBBBA covers a wide range of reforms that will impact nearly every taxpayer. With new deductions and provisions like permanent individual income tax rates and increased estate and gift tax exemptions, along with a temporary expansion of the SALT cap, among others, individuals will need to consider how these changes layer into their broader financial strategy.

Without that big-picture perspective, individuals might miss an opportunity—or many—to realize significant savings down the line. Through the granularity of each provisional change comes broader opportunities to improve cash flow, optimize retirement and charitable planning, and plan beyond an annual tax return for strategic wealth building.

Here’s a snapshot of what changes may directly impact personal finances.

New Deductions and Tax Benefits

Effective for tax years 2025-2028 and subject to AGI limitations, the OBBBA carves out a number of deductions for hourly-wage employees, their employers, and seniors 65 and older.

Employers must now track and report these deductions on W-2s and, where applicable, update payroll systems and processes to capture these details and monitor annual limits.

The OBBBA introduces several new individual tax benefits, including:

  • No Tax on Tips
    • Allows up to a $25,000 deduction for qualified tips received in certain occupations. *
    • Includes voluntary tips from customers (including tip pools), not mandatory service charges applied by the employer.
    • Permits only those occupations that customarily and regularly receives tips: food service, hospitality, and personal care services.
    • The deduction phaseout begins for taxpayers with modified adjustment gross income over $150,000 (single) or $300,000 (married filing a joint return).
  • No Tax on Overtime
    • Allows up to a $12,500 ($25,000 married filing jointly) deduction for qualified overtime compensation. *
    • Non-exempt employees must be federally mandated FLSA “time-and-a-half” for hours worked over 40 in a week.
    • Employers may use a reasonable estimate for W2 reporting in 2025.
    • Employers are expected to report information on updated W2s in Box 12 using code “TT” in 2026.
    • The deduction phaseout begins for taxpayers with modified adjustment gross income over $150,000 (single) or $300,000 (married filing a joint return).
  • Car Loan Interest Deduction
    • Individuals can deduct up to $10,000 in interest paid on qualifying American-made auto loans. *
    • The deduction phaseout begins for taxpayers with modified adjustment gross income over $100,000 (single) or $200,000 (married filing a joint return).
  • Enhanced Deduction for Seniors
    • Seniors aged 65 and older can claim a deduction of $6,000 per individual.
    • The deduction phaseout begins for taxpayers with modified adjustment gross income over $75,000 (single) or $150,000 (married filing a joint return).

Please note: Tips and overtime are subject to FICA, meaning social security and Medicare tax still apply.

 *The deduction is available to taxpayers who claim the standard deduction or who itemize.

Key Tax Changes for Individuals in 2025

A number of provisions from the TCJA have been either extended or made permanent for the 2025 tax year, giving a little more time to plan with certainty before yearend.

  • Individual Income Tax Rates: The seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are now permanent and will continue to be adjusted for inflation.
  • Standard Deduction: The increased standard deduction amounts are made permanent and indexed for inflation: $15,750 (single filers), $23,625 (head of household), and $31,500 (married filing jointly).
  • State and Local (SALT) Deduction: The cap on SALT deductions temporarily increases to $40,000, with thresholds increasing 1% each year starting in 2026-2029 and phase-outs for AGI beginning at $500,000 and capping above $600,000.
  • Child Tax Credit: The credit was increased to $2,200 per child and made permanent with phase-out thresholds of $200,000 ($400,000 for married filing jointly). A $500 credit for qualifying dependents was also made permanent.
  • Mortgage Interest Deduction: The $750,000 debt limit is now permanent and includes mortgage insurance premiums.

Key Tax Changes for Individuals in 2026

On the horizon, several OBBBA provisions will take effect in 2026 and allow individual taxpayers to plan and implement year-end tax strategies earlier.

  • Estate and Gift Tax Exemption: The exemption amount increases to $15 million (indexed for inflation) and made permanent with no sunset.
  • Itemized Deduction Limit: Taxpayers in the 37% tax bracket will have a new cap on total itemized deductions, limited to 35%.
  • Charitable Contributions: A new limitation of 0.5% of AGI will apply to itemized charitable deductions. Non-itemizers can deduct up to $2,000 (married filing jointly) in contributions.
  • 529 Plan Qualified Expenses: The annual limit on K-12 expenses will double from $10,000 to $20,000 per beneficiary and expand post-secondary credentialing expenses.
  • Trump Account for Minors: New tax-favored accounts for individuals under the age of 18 will cap contributions at $5,000 per year (employer contributions at $2,500 per year), and the government will provide the initial $1,000 to US citizen newborns through 2028.

Top Tax Headlines for Businesses

The OBBBA also delivers a series of business-friendly tax incentives aimed at encouraging growth and investment across industries.
For a capital-intensive industry like private clubs, this legislation creates not only the financial runway clubs need to improve cash flow and reinvest in physical improvements, but perhaps the bigger opportunity is understanding how all the provisions collectively work together to strengthen operations and financial performance across the entire organization.

Business Tax Provisions Made Permanent

The OBBBA modified the following business provisions and extended their effective period indefinitely, including:

  •  100% Bonus Depreciation: Businesses can fully expense qualified property in the first year acquired and placed in service on or after Jan. 19, 2025, including a new category for “Qualified Production Property.”
  • Increased Section 179 Expensing: The deduction amount increased from $1.25 million to $2.5 million in 2025, with the phaseout threshold also up from $1.25 million to $4 million.
  • 163(j) Business Interest Limitation: Returns to the more favorable pre-2022 EBITDA calculation.
  • Expensing of Domestic R&D Expenses: Businesses can immediately expense domestic research and development costs retroactively to January 2025, with options to take previously capitalized deductions on the 2025 return with an amended return for 2022-2024 costs.
  • Section 199A Deduction: Retains the 20% Qualified Business Income deduction with minor changes to the AGI phase-outs.

Other Important Business Updates

  • Form 1099 Reporting: The reporting threshold increases from $600 to $2,000 for the 2026 tax year (indexed for inflation).
  • PTET Election: Eligible pass-through entities can still claim deductions for state and local income taxes at the entity level.
  • Employee Retention Credit (ERC): Claims for Q3 and Q4 2021 filed after Jan. 31, 2024 are no longer eligible. The statute of limitations for the IRS to review ERC claims has been extended to six years from the date the claim is filed.
  • Clean Energy Credit Phaseouts: Several clean energy credits will be eliminated and phased out throughout 2025 and 2026, including:
    • Energy Efficient Commercial Buildings, Alternative Fuel Refueling Property Credit, and New Energy Efficient Home Credit terminates for property that begins construction or acquired after June 30, 2026.
    • Energy Efficient Home Improvement and Residential Clean Energy credits terminates for property placed in service after Dec. 31, 2025.
    • Previously Owned Clean Vehicle, Clean Vehicle Credit, and Commercial Clean Vehicle Credit terminates for vehicles acquired after Sept. 30, 2025.
    • Residential Solar Tax credit terminates after Dec. 31, 2025.

Looking Ahead

While each situation will be different, these changes raise important questions for private clubs and their employees. Connect with your advisor to discuss how the following may apply:

  • Should your private club transition from mandatory service charges to a discretionary tip model to allow employees to benefit from the new income tax deduction?
  • With 100% bonus depreciation and increased Section 179 expensing, is now the right time to undertake a capital improvement project?
  • How will state laws conform to these new federal deductions, and what impact will that have on planning?

Because many of the new tax provisions are retroactively applied or soon go into effect, the cost of inaction could be significant. Private clubs will need to consider the impact of both the permanent baseline provisions and how they intersect with temporary provisions scheduled to sunset after 2028.

Before making any changes to compensation practices or payroll systems, or planning capital improvements, consult with your advisor to develop the most strategic approach. For more information on how the OBBBA impacts your private club, contact Edward T. Yoder and Todd Swisher, Partners with PBMares.

Watch the webinar and download the slides: https://www.pbmares.com/webinar-recording-obbbas-impact-on-private-clubs/