Published May 27, 2025

The U.S. House recently passed the reconciliation bill H.R. 1, known as the One Big Beautiful Bill Act, and the National Restaurant Association (NRA) is applauding it. Why? This legislation provides critical tax relief and workforce support for restaurants nationwide at a time when inflation, labor shortages, and rising costs are straining operators.

What’s in the Bill That Helps Restaurants?

1. 199A Business Income Deduction Preserved

Restaurant owners can continue to deduct up to 20% of qualified business income, a significant tax relief that frees up cash for payroll, rent, and reinvestment.

2. Full Expensing of Equipment and Renovations

Restaurants can now immediately deduct the full cost of kitchen upgrades, dining room renovations, or new equipment — rather than depreciating it over years.

3. More Favorable Interest Expense Rules

The bill reinstates the ability to count depreciation and amortization when calculating interest expense deductions, offering significant relief for debt-heavy operators.

New Provisions Supporting Restaurant Workers

4. No Tax on Tips Act

A major highlight of the bill is the No Tax on Tips Act, which exempts up to $25,000 per year in tip income from federal taxes for employees earning under $160,000. According to Time Magazine, this could dramatically increase take-home pay for millions of tipped workers in restaurants, bars, and hotels.

5. No Tax on Overtime Pay

Employees working overtime can also benefit from tax-free additional earnings. This incentive aims to ease labor shortages in the restaurant industry by encouraging longer shifts — a move that was celebrated when the Senate passed the measure, according to Barron’s.

Industry Reaction: A Strong Step Forward

Michelle Korsmo, President & CEO of the NRA, said in a May 2025 press release:

“This legislation is a major victory for restaurant owners, employees, and the communities they serve. It incorporates key tax provisions vital for industry growth...”

The association emphasized how these changes help operators cover rising costs, stay competitive, and continue recovering from the effects of the COVID-19 era.

Why This Matters in 2025

Many restaurants are still navigating a volatile economy, high labor turnover, and tighter consumer spending. The passage of H.R. 1 gives them:

• Breathing room on taxes

• Tools to invest in infrastructure

• A way to retain talent and support tipped workers

As policymakers debate further support for small businesses, this bill represents a clear and timely boost to one of the nation’s most essential industries.

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Sources:

• National Restaurant Association Statement on H.R. 1

• Barron’s – No Tax on Tips Act Passes Senate

• Time – Tip Income Tax Relief Explained

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