Tax Planning in the Trump Era: Maximizing New Deductions From the OBBBA

For several decades, tax planning has always been a balancing act for business owners in the United States. However, the passage of the One Big Beautiful Bill Act (OBBBA) under the Trump administration introduced various opportunities. With new provisions targeting small businesses, deductions are now available in areas such as employee compensation, business vehicle financing, and operational costs that were previously limited or nonexistent.

Key Takeaways

• The One Big Beautiful Bill Act (OBBBA) introduced multiple new tax deductions.
• Key benefits include deductions for employee tips, overtime, and vehicle financing.
• Strategic planning is required to leverage these provisions in 2026 and beyond.
• LLCs, corporations, and sole proprietors can all benefit, but eligibility varies.
• Proactive tax planning reduces liabilities and enhances long-term savings.

Understanding the OBBBA and Its Impact

The One Big Beautiful Bill Act (OBBBA) was introduced as part of a broader effort to stimulate domestic business growth, incentivize fair labor practices, and encourage investments in American-made goods. Unlike traditional tax reforms, this legislation carved out targeted deductions that directly impact day-to-day business operations.

The Act reflects a policy shift toward rewarding businesses for:

• Providing competitive wages and compensation.
• Supporting workers through transparent reporting of tips and overtime.
• Investing in vehicles and assets manufactured in the US.

By focusing on these areas, the law not only reduces tax burdens but also strengthens the connection between small businesses and the national economy.

Major Deductions Under the OBBBA

Deduction for Employee Tips

One of the most notable provisions is the ability for employers to deduct reported employee tips. Historically, tips were primarily taxable to employees, but businesses had limited ability to offset payroll expenses connected to those earnings. The OBBBA addresses this by giving employers a stronger incentive to report tips while lowering their taxable liability accurately.

For service-based industries like restaurants, salons, and hospitality, this deduction creates significant annual savings and encourages transparency in reporting.

Deduction for Overtime Payments

Overtime used to be considered a labor expense with no direct tax relief for employers. Now, businesses can deduct these costs, which provides a financial cushion when staffing needs require longer hours. This change not only benefits employers but also improves employee morale by encouraging businesses to offer overtime without excessive financial strain. 

Industries with seasonal fluctuations, like retail, manufacturing, and logistics, may benefit the most from this groundbreaking development.

Deduction for Interest on Loans for US-Assembled Vehicles

The OBBBA introduced a deduction aimed at strengthening domestic manufacturing. Businesses that purchase US-assembled vehicles and finance them through loans may now deduct the interest. This provision supports small businesses that rely on fleets, such as construction companies, delivery services, and trades. 

By incentivizing purchases of American-made vehicles, it encourages economic growth while helping businesses lower their overall cost of ownership.

Ways to Maximize the OBBBA Deductions

Conduct a Tax Review

Work with a tax professional to evaluate which OBBBA deductions apply to your industry and operations. A personalized review ensures you do not overlook valuable opportunities.

Reevaluate Business Structure

Some deductions are more accessible to LLCs or corporations. Reviewing your business structure may reveal opportunities to increase savings while enhancing liability protection.

Track Employee-Related Expenses Meticulously

Employee tips and overtime require clear documentation. Investing in payroll software ensures accurate reporting and maximizes deductible amounts.

Leverage Accelerated Depreciation

If you plan to purchase equipment or technology, timing those investments strategically can maximize depreciation deductions under OBBBA rules.

Incorporate Vehicle Deductions Into Planning

Businesses that rely on transportation should review their fleet strategy. Financing US-assembled vehicles saves money and aligns with the law’s domestic investment incentive.

Long-Term Implications for Small Businesses

The advantages of OBBBA extend beyond immediate deductions. By incentivizing certain practices, the Act encourages businesses to:

• Adopt better payroll and recordkeeping systems.
• Prioritize domestic investment.
• Retain senior employees, strengthening institutional knowledge.
• Reinvest savings into growth opportunities.

Proactive compliance with OBBBA provisions positions owners for financial resilience.

Common Pitfalls to Avoid

1. Failing to Maintain Records: Many deductions require precise documentation. Without it, businesses risk losing eligibility.
2. Assuming All Businesses Qualify: Not every deduction applies universally—some are industry-specific.
3. Neglecting State Taxes: While OBBBA applies federally, states may not recognize the same deductions.
4. Overlooking Long-Term Impact: Immediate savings must be balanced with future tax obligations.
5. DIY Tax Planning Without Expertise: The complexity of OBBBA provisions makes professional guidance a necessity.

Frequently Asked Questions

What is the OBBBA?

The One Big Beautiful Bill Act is a tax reform measure designed to create deductions that directly benefit small businesses. It emphasizes labor transparency and domestic investment.

Who qualifies for the tip deduction?

Any employer who pays wages where tips are part of employee income qualifies. The key is ensuring accurate reporting of tips.

Does the overtime deduction apply to all industries?

Yes, all industries qualify, but it benefits sectors with high seasonal or labor-intensive needs most. Accurate payroll documentation is required.

Can businesses deduct tips paid in cash?

Yes, as long as they are reported properly through payroll. Unreported cash tips do not qualify.

What vehicles qualify for the loan interest deduction?

Only vehicles assembled in the United States are eligible. Businesses should retain purchase and financing records as proof.

Is leasing a vehicle eligible for the deduction?

No, loan interest on financed purchases qualifies. Leasing does not fall under this provision.

How do these deductions impact taxable income?

They reduce taxable income directly by lowering the amount subject to taxation. This leads to smaller tax bills and higher retained earnings.

Can businesses retroactively apply these deductions? 

Yes, but only for qualifying expenses incurred after the OBBBA’s enactment. Past expenses before the law are not eligible.

Will these deductions be permanent?

Not necessarily, as tax laws can change under future administrations, businesses should plan annually based on the current law.

Should small businesses still use traditional tax strategies?

Yes, the OBBBA complements but does not replace standard strategies like depreciation or retirement plan contributions.

Expert Tips From NCH

1. Upgrade Payroll Systems: Ensure the software accurately captures overtime and tip reporting to maximize deductions.
2. Time Vehicle Purchases Strategically: Acquire US-assembled vehicles in profitable years to offset higher taxable income.
3. Keep Detailed Records: Documentation is key to defending deductions in case of IRS scrutiny.
4. Combine with Other Incentives: Leverage the OBBBA deductions alongside existing tax credits for optimal savings.
5. Schedule Annual Tax Reviews: Regular reviews with professionals ensure you remain compliant while taking full advantage of opportunities.

Final Thoughts

The OBBBA has reshaped tax planning in the Trump era by offering deductions that reward businesses for transparent labor practices and domestic investments. From service industries capitalizing on tip reporting to logistics companies benefiting from vehicle deductions, these provisions represent valuable opportunities for reducing taxable income.

Partner with NCH to maximize your tax planning strategies under the OBBBA. Our experts will help you uncover savings, ensure compliance, and design a plan based on your business goals. 

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.