On the 4th of July, President Donald Trump signed “One Big Beautiful Bill” (BBB) into law. According to its summary, this bill “[r]educes taxes, reduces or increases spending for various federal programs, increases the statutory debt limit, and otherwise addresses agencies and programs throughout the federal government.”
The BBB introduces new policies that employers need to be aware of. Here’s a brief summary, though this budget reconciliation legislation is massive (nearly 900 pages) and we recommend speaking with business law attorneys about how it directly impacts your business.
More Resources for Recruitment and Retention
The BBB makes the Employer Student Loan Repayment Exclusion under Section 127 of the tax code permanent, allowing employers to contribute up to $5,250 per employee annually toward student loan payments, tax-free. This provision, previously temporary under the CARES Act and extended multiple times, is now permanent and indexed for inflation starting in 2027.
That’s a powerful new perk for businesses looking to attract young, educated talent. But for businesses with slim margins or few white-collar roles, it’s less relevant and may even widen the benefits gap between large entities and smaller players.
Another change to employee benefits is the increase in the Dependent Care Flexible Spending Account (FSA) limit to $7,500 from $5,000 (married filing jointly) and to $3,750 from $2,500 (filing separately). This allows working parents to set aside more pre-tax dollars for childcare, lowering their taxable income and easing one of the most common household expenses.
This family-friendly policy doesn’t cost the employer more to implement, though business owners offering FSAs will need to update plan documents and educate employees on the expanded limit.
Another family-friendly policy that got a boost is the Employer-Provided Childcare Credit. The maximum annual credit increased from $150,000 to $500,000 ($600,000 for eligible small businesses).
The government now reimburses employers for up to 40% (50% for eligible small businesses) of their childcare facility or service expenses, encouraging investment in workplace childcare or partnerships with local providers. However, this benefit is only accessible to businesses with the capacity to develop or subsidize childcare solutions in the first place, which admittedly is a tall order for smaller businesses.
Upskilling Gets a Boost . . . But Also a Bill
The BBB expands allowable uses for 529 education savings plans. Businesses can now offer 529 contributions that help employees pay for post-secondary credentialing programs or continuing education tied to industry-recognized skills, which is an effort from the government to address workforce skill gaps. This change could help organizations invest in employee development while retaining talent. However, it may also come with a learning curve: employers must understand which programs qualify, and employees must weigh the benefits against other financial priorities.
Six Months for Paid Family and Medical Leave
The Paid Family and Medical Leave Tax Credit (PFML) was also extended and expanded. Not only was this tax credit made permanent (it was previously set to expire Dec. 31, 2025), but employers can now apply the credit to employees who’ve worked at least six months, rather than the prior threshold of one year.
This change widens access and supports workplace flexibility, which may help reduce turnover. But offering leave does come at a cost, especially for small businesses without the infrastructure to redistribute workloads during absences.
Employers may choose one of two methods (but not both) to claim the PFML credit :
- Wages Paid: A portion of wages paid to qualifying employees during their leave; OR
- Insurance Premiums: A portion of premiums paid for PFML insurance policies, even if no leave has been taken
This flexibility allows employers to pick the structure that aligns best with their leave program, whether self-insured or insured.
Startup and Investment Incentives
We saw several changes in the BBB that benefit startups and investors. For instance, it enhances the Qualified Small Business Stock (QSBS) exclusion, raising the eligibility cap from $50 million to $75 million in assets and introducing new capital gains exclusions: 50% after three years, 75% after four, and 100% after five. These changes make it easier for founders and investors to cash out earlier with less tax burden. However, the details of eligibility are quite complex, especially for organizations using financing instruments like SAFEs or convertible notes, and legal counsel is highly recommended.
What’s the Trade-Off?
While many provisions in the BBB aim to support small business growth and workforce development, not every outcome is rosy. Several economists have pointed out that while the bill cuts taxes and offers targeted incentives, it also reduces funding for public health programs, renewable energy credits, and safety-net services like SNAP and Medicaid. These changes won’t show up on a business’s balance sheet directly, but they can impact employees, especially lower-wage workers, through reduced healthcare access or food assistance. That may ultimately pressure business owners to increase compensation or absorb rising healthcare costs.
There’s also an administrative cost to implementation. New benefit limits, credits, and exclusions often come with new recordkeeping responsibilities, nondiscrimination testing, and policy revisions. For small employers without a full-time HR or finance team, staying compliant can be burdensome.
In short, please work with an attorney to ensure you are adhering to the new BBB policies and regulations.
How Malek + Malek Can Guide Your Business Through BBB Policies and Regulations
The One Big Beautiful Bill delivers some new tools for small businesses: permanent student loan repayment, richer tax credits, and expanded education and childcare incentives. These changes can improve hiring, retention, and skill development, if a business is in a position to take advantage of them.
Here’s how we can work together to translate policy, into action :
- Legal Guidance: We’ll help you understand how the bill’s provisions intersect with your existing employment policies, contracts, and benefits structure.
- Compliance: We assist in navigating new reporting requirements and avoiding costly missteps, especially when accessing federal or state-level tax credits and funding.
- Opportunities: From rethinking benefits packages to tapping into new incentives, we work with you to identify the strategic advantages tucked inside complex legislation.
Policy shifts don’t have to mean a disruption to your business. With the right legal team, we can help you turn regulation into a roadmap for growth.