Recently, the Joint Committee on Taxation (a committee of the U.S. Congress) published the “General Explanation of the Tax Provisions of Public Law 119-21,” also known as the “One Big Beautiful Bill.” As the one-year anniversary of the bill’s enactment approaches, here are key provisions of the law every staffing firm should know.
No Tax on Overtime. Effective for tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate, basically the “half” portion of “time-and-a-half” that is reported on a Form W-2 statement. The maximum annual deduction is $12,500 ($25,000 for joint filers), phasing out for taxpayers with modified annual gross income over $150,000 ($300,000 for joint filers).
It is important for staffing firms to note that this is a deduction employees claim on their tax returns, not an exclusion from withholding, so overtime pay is still subject to normal withholding. Because qualified overtime is required to be reported separately on W-2s starting in 2026, employers should ensure payroll systems can isolate required overtime premium pay from total compensation. It is also important to note that overtime not required by the Fair Labor Standards Act, such as voluntary employer-paid overtime or state-law overtime, is not eligible for the deduction.
Permanent QBI Deduction. While the Qualified Business Income deduction (which allows eligible taxpayers such as owners of sole proprietorships, partnerships, S corps., and LLCs to deduct up to 20% of their qualified business income) was scheduled to expire at the end of 2025, language in the One Big Beautiful Bill permanently extended this deduction. This provides long-term certainty to millions of small and mid-sized businesses.
Note: The bill also extended the phase-in range over which limitations kick in, from $100,000 to $150,000 for married joint filers and from $50,000 to $75,000 for other filers, making it easier for more business owners to get the full tax break.
The Bottom Line for ASA Members. The provisions summarized here represent some of the most significant aspects of the One Big Beautiful Bill Act for staffing firms and their employees, but they are by no means exhaustive. The law is broad and complex, and additional provisions may affect your business depending on your specific circumstances.
ASA encourages all members to consult with their legal counsel, tax advisers, and payroll partners to fully understand how the law applies to their operations and to ensure they are in compliance with all applicable requirements.