In July 2025, the federal government passed a tax law called the One Big Beautiful Bill Act.

It changed rules around payroll taxes, employee benefits, reimbursements, deductions, and even contractor payments.

1. The Biggest Change: Payment Apps & 1099 Contractors

What changed?

Previously, the IRS planned to track contractor payments over $600 via Venmo, PayPal, Stripe, etc.

Now the threshold is much higher:

A 1099 reporting trigger generally applies only if BOTH happen:

• Payments exceed $20,000
• AND there are more than 200 transactions

Example

You hire a freelance designer and pay them $8,500 through PayPal in 15 payments.

Old rule: IRS reporting triggered

New rule: Not automatically triggered

What this means for employers

This does NOT remove your responsibility to classify workers correctly.

You still must determine:

• Employee vs Independent Contractor
• Wage vs stipend
• Payroll tax withholding vs 1099 reporting

This is where businesses get audited — not the payment app.

HR takeaway:

Misclassified audits will increase because reporting visibility decreases.

2. Equipment & Machinery Write-Offs (Huge for Growing Companies)

Businesses can now deduct 100% of certain equipment costs in year one instead of spreading depreciation over years.

Example

You buy:

• $35,000 manufacturing machine
• $7,000 computer systems
• $4,000 HR software hardware

Old rule: deduct slowly over 5–7 years

New rule: deduct everything immediately

HR Impact

This directly affects hiring decisions.

Companies now often:

• Purchase equipment first
• Then hire employees after tax savings improve cash flow

Smart businesses coordinate:

Hiring plans + capital purchases + payroll strategy

3. Employee Retention Credit (ERC) Changes

The government is now limiting certain late ERC refund claims.

Why this matters

Many businesses relied on ERC refunds to fund payroll.

Now:

• Some claims may be denied
• Appeals rules apply
• Documentation matters more than ever

HR Risk

If payroll records are messy:

• Timesheets missing
• Improper classifications
• No wage allocation documentation

You could lose the credit AND face penalties.

4. Health Savings Account (HSA) Benefits Expanded

Employees can now use telehealth before meeting deductibles and still contribute to HSAs.

Also starting 2026:

More health plans qualify for HSAs

Example

An employee has a high deductible plan.

Old rule:

Doctor visit → lose HSA eligibility

New rule:

Telehealth visit → still eligible

HR Opportunity

Employers can now offer:

• Lower-cost benefit packages
• Better recruiting benefits
• Tax-advantaged compensation

This makes benefits strategy a hiring advantage — not just a cost.

5. New Child Investment Accounts (Employer Benefit Opportunity)

The law creates child investment accounts with:

• $1,000 government contribution
• Up to $2,500 employer contributions tax-free

Example

Instead of a raise:

Employer contributes $1,200 annually to employee child account.

Employee receives:

• Future wealth benefit
• No payroll tax impact
• Higher retention incentive

6. Clean Energy Credits Ending Soon (Business Planning Alert)

Several tax credits expire after Sept 30, 2025 for vehicles and Dec 31, 2025 for home energy improvements.

HR Connection

Companies using sustainability perks in compensation packages must adjust:

• Fleet benefits
• Commuter incentives
• Green reimbursements

7. Rural & Agricultural Lending Benefits

Certain lenders can exclude 25% of interest income from taxes on rural property loans.

Why HR cares

This directly affects:

• Farming companies
• Manufacturing
• Construction businesses

Lower financing cost → more hiring capacity

What This Law REALLY Means for Employers

This bill is less about taxes…

And more about how companies structure payroll, benefits, and workforce planning.

Businesses that adapt will:

• Hire smarter
• Offer better benefits
• Avoid audits
• Improve cash flow

Businesses that ignore it will:

• Misclassify workers
• Lose credits
• Overpay payroll taxes