Article

Employer-provided fringe benefits in the OBBBA: Six things taxpayers should know

Aug. 19, 2025 · Authored by Christine Faris

The One Big Beautiful Bill Act (OBBBA) (P.L. 119-21) made noteworthy changes to common employer-provided fringe benefits. Here are six planning considerations for employers:

1. Employer-provided student loan payment assistance

The Tax Cuts and Jobs Act (TCJA) permitted employers to make non-taxable contributions towards employees’ student loan payments under Internal Revenue Code (IRC) section 127. The OBBBA makes this exclusion permanent. In addition, OBBBA indexes the maximum educational assistance exclusion of $5,250 for inflation after 2026.

Planning consideration: Employers may consider reviewing and updating their educational assistance plans for inclusion of employees’ student loan payments and track the inflation adjustment for 2026.

2. Employer-provided reimbursement of qualified moving expenses

The TCJA temporarily suspended the deduction for qualified moving expenses under IRC section 217 and the corresponding exclusion from income under IRC section 132(g) through 2025. The OBBBA permanently eliminates the deduction and income exclusion, except for members of the armed forces or intelligence community.

Planning consideration: Employers should review their relocation policies for federal tax compliance and continue to treat moving expense reimbursements as taxable compensation to employees.

3. Employer-provided reimbursement of qualified transportation expenses

Prior to the TCJA, qualified bicycle commuting expenses reimbursements were excluded from employees’ income. The TCJA eliminated this exclusion through 2025. The OBBBA permanently eliminates this exclusion. In addition, the OBBBA modifies the inflation adjustment for the limitation on qualified transportation fringe benefits under IRC section 132(f).

Planning consideration: Employers should continue to treat bicycle commuting reimbursements as taxable and review policies to ensure compliance.

4. Employer-provided meals

The TCJA reduced the corporate deduction for food and beverages provided to employees to 50%. The OBBBA disallows any deduction after 2025. There are some exceptions for the fishing industry.

Planning consideration: Businesses in the fishing industry should document how they meet the criteria for the deduction. Other companies are advised to review the business purpose of employer-provided meals and evaluate whether the benefit for employees justifies the cost.

5. Employer-provided dependent care assistance programs

Through 2025, employees can make up to $5,000 per year ($2,500 if married filing separately) in pre-tax annual contributions to employer-provided dependent care assistance programs (DCAP) under IRC section 129. Beginning in 2026, the OBBBA increases the threshold to $7,500 ($3,500 if married filing separately.) The new limit is not indexed for inflation.

Planning consideration: Employers should review and update DCAP plan documents for the higher limit and coordinate any changes with payroll systems to ensure accurate withholding and W-2 reporting. In addition, enrollment materials may need to be revised for 2026 open enrollment.

6. Employer-provided paid family and medical leave

The TCJA provided a temporary tax credit for employers who offer family and medical leave. For tax years beginning in 2026, the OBBBA expands the scope of the credit by allowing employers to use the credit for paid leave or for insurance premiums the employer pays for family and medical leave coverage. The OBBBA also reduces the work requirement from one year to six months and makes the credit permanent.

Planning consideration: Employers who offer paid family and medical leave should review their current program for compliance with the changes made by OBBBA.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.