If you're running a construction or contractor business in Florida - whether based in Orlando, Tampa, Miami, Jacksonville, or anywhere else - you may have heard of the newly passed One Big Beautiful Bill Act (OBBBA). While most headlines have focused on tax cuts and family credits, a provision directly affects your workforce: a new tax deduction for overtime pay.

And while tips are also included in this legislation, we'll explain why those likely won't apply to your job sites - but the overtime rules definitely will.

Note: As a business owner, it likely won't affect your personal tax return directly, but it's good to know how it will impact your team - and where to direct them if they have questions.

Here's the Key Takeaway

Overtime can be a pain, and no one likes to be stuck at the job site late. However, one tax perk is coming for overtime pay. Starting with the 2025 tax year, employees who receive overtime can deduct the "premium" portion (that extra half-time pay above their regular hourly rate) from their taxable income. This means:

Workers won't pay federal income tax on that portion of their overtime.

Payroll tax rules (Social Security, Medicare, and Florida reemployment tax) still apply—this is a deduction at filing time, not a change in how you process payroll now.

📅 This rule is temporary—it applies from 2025 through 2028.

What Does This Mean for you as the business owner?

1. Your labor costs don't change—your employees' take-home pay does.

This new deduction doesn't cost your business more in gross wages but gives a tax benefit to your workers. We get it - you and your employees may not like overtime happening, but if it does, this could mean nice tax savings for your crew.

2. You'll need to make sure overtime is tracked correctly.

Payroll software will need to identify the "premium" overtime portion separately. The IRS will require this info on W-2s starting in 2026 (for the 2025 tax year), and your payroll provider is likely aware of this. But check in with them to see how they plan on handling it.

3. Owner-employees generally don't qualify.

If you're taking a W-2 salary, you may be "exempt" from overtime, and this deduction wouldn't qualify for you — but it can help your team.

What About Tips?

The OBBBA also includes a deduction for cash tips, but this is mainly aimed at restaurant and hospitality workers. The IRS will publish a specific list of qualifying tipped occupations, and this part of the law likely won't affect your Florida construction firm.

What's Next?

While this law has been signed, the IRS must issue detailed guidance -including a list of tipped roles and revised payroll withholding tables. In the meantime:

- Work with your payroll provider to make sure overtime tracking is in place

- Keep your team informed so they are aware of any benefits to their 2025 taxes

- Stay tuned for further updates on the tax bill

Don't already have an accountant or tax preparer? Feel free to schedule a call to see if we'd be a good fit for you.