What the OBBBA Means for Restaurants

In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The legislation includes a wide range of tax changes, and several are likely to affect how restaurants approach both year-end planning and long-term decisions. The new law brings back full bonus depreciation and allows for immediate expensing of qualified research and development costs. It also raises the limit on business interest deductions and makes the Qualified Business Income deduction permanent. In addition, new payroll reporting rules for tip income and overtime will apply starting in 2025.

These changes come at a time when many restaurant owners are preparing for growth. Industry sales are expected to approach $1.5 trillion this year, and total employment may reach 16 million. The updates in the bill may help support that growth by improving cash flow and giving owners more flexibility to act on new opportunities. To help clients, prospects, and others, WhippleWood CPAs has summarized the key details below.

Key Tax Provisions for Restaurants 

• Bonus Depreciation — Before the new law, bonus depreciation was scheduled to drop to 40% in 2025, then 20% in 2026, and expire completely in 2027. The OBBBA reverses that phaseout and restores 100% bonus depreciation for qualifying property purchased after January 20, 2025. This includes items like kitchen equipment, furniture, point-of-sale systems, and leasehold improvements.
• Section 179 — The OBBBA raised the Section 179 deduction limit to $2.5 million for qualifying property placed in service in 2025, doubling the prior cap. This allows restaurant owners to deduct the full cost of eligible equipment, software, and certain property improvements—such as commercial appliances, HVAC systems, or back-office technology—up to that threshold in the year the items are placed in service. The deduction begins to phase out when total purchases exceed $4 million and is fully phased out at $6.5 million. Section 179 can also be used alongside bonus depreciation for qualifying assets, giving restaurant operators more flexibility to manage capital investments, reduce taxable income, and improve cash flow.
• Interest Deduction — Under Section 163(j), the OBBBA changes the way the business interest deduction limit is calculated. Starting in 2025, businesses can once again add back depreciation and amortization when calculating adjusted taxable income. This changes the formula from an EBIT approach (earnings before interest and taxes) to an EBITDA approach (earnings before interest, taxes, depreciation, and amortization). This may allow for a larger interest deduction than in prior years.
• QBI deduction — The 20% Qualified Business Income (QBI) deduction was made permanent. Restaurant owners who operate as sole proprietors, LLCs, partnerships, or S corporations can continue to claim this deduction under Section 199A. The OBBBA also raised the income thresholds that determine eligibility, which means more owners may qualify without limitation.
• R&D Expensing — The OBBBA lets businesses fully deduct research and development costs in the year they happen, instead of spreading them out over five years. The change also applies to past years. The law says that restaurants with average gross receipts under $31 million can amend 2022 through 2024 returns or claim a catch-up deduction in 2025 and 2026. Larger businesses cannot amend returns but can speed up the remaining deductions starting in 2025. Restaurants may qualify if they develop new menu items, test recipes, improve workflows, or build custom tech.
• Tips and Overtime — Effective in 2025, employers must separately report qualified tip income and overtime wages for each employee. Tips must be voluntary in order to be treated as qualified tips. Restaurants that require tips for parties of a certain size will need to segregate tips between those that were voluntary and those that were required. You might want to re-evaluate your tip policies. Overtime pay is only the portion of the pay that is over the standard hourly wage rate and is limited to the overtime premium required under federal law. Restaurants that employ tipped and hourly staff will want to check payroll systems for compliance.

Additional Considerations

Several tax benefits were not extended under OBBBA. Restaurant owners will want to review plans to capture these credits before they expire.

The Work Opportunity Tax Credit (WOTC) is available through December 31, 2025. It provides a federal tax credit to employers who hire individuals from targeted groups, including veterans, long-term unemployed individuals, and recipients of certain public benefits. For most qualifying new hires, the average credit is about $2,400. The National Restaurant Association is advocating for the credit’s extension, citing its value to employers with ongoing hiring needs.

Several clean energy tax incentives are now going to expire earlier than expected. Restaurants may want to make special note of Section 179D and Section 30C. They both expire on June 30, 2026. Section 179D is a popular deduction and applies to energy-efficient improvements made to commercial buildings, including items like solar panels, HVAC systems, and exterior windows and doors. Section 30C is a tax credit that applies to installing electric vehicle charging stations on commercial property. With both incentives expiring within a year, it will be important to watch timelines and accelerate projects, if needed.

Finally, the Employee Retention Credit (ERC) is no longer available for new claims, but restaurant owners who filed before the January 31, 2024, cutoff still need to be aware of some important updates. The OBBBA extends the IRS review period to six years. That means claims could still be audited several years from now. Restaurant owners who claimed the ERC will want to keep any records and make sure documentation is complete and accurate.

Contact Us 

The changes in the OBBBA may help restaurants and their owners reduce tax liability and support future growth plans. Reviewing relevant updates and planning can make a difference. If you have questions about the information outlined above or need assistance with another tax or accounting issue, WhippleWood CPAs can help. For additional information call 303-989-7600 or click here to contact us. We look forward to speaking with you soon.