Cash Tips and Overtime Now Eligible for Tax Breaks
After Passage of Big Beautiful Bill. President Donald Trump signed the Big Beautiful Bill into law on Independence Day, which includes a provision that exempts certain cash tips from federal income tax. Under the new rule, workers in industries that “customarily and regularly” received tips can deduct up to $25,000 of their annual cash tips from their taxable income. A previous version of the Big Beautiful Bill stated qualifying workers could deduct 100 percent of their reported cash tips from their taxable income. The tips must be cash and voluntarily paid. Also, the taxpayer must have a valid Social Security number. High earners are excluded. The tax benefits phase out beginning with those who earn more than $150,000 and disappear entirely at $250,000 (double those figures for joint filers). The law will end in 2028 unless extended by Congress. Martha Gimbel, executive director at the Yale Budget Lab and a former official under the Biden administration, told NPR that the new “no tax on tips” law won’t significantly impact low-income workers. “Very low-income Americans are not going to benefit from this, largely because they already have little to no taxable income,” Gimbel said to the publication. “And so, what you are largely seeing is that this provision will benefit people who are in the middle, upper-middle income brackets.” The Big Beautiful Bill also allows workers to deduct up to $12,500 of qualified overtime compensation from their taxable income (double that for married couples filing jointly). Similar to the tips provision, the deduction begins to phase out at $150,000 for individuals and disappears entirely at $250,000 (double those figures for joint filers). This law also sunsets in 2028 unless extended by Congress. The National Restaurant Association applauded the new tips and overtime taxing rules. “This recognition of valuable restaurant staff will put cash back in the pocket of a significant number of these hard-working people and could help restaurant operators recruit needed additional talent,” Michelle Korsmo, president and CEO of the Association, said in a statement. Below are other tax benefits to the restaurant industry within the Big Beautiful Bill, according to the Association…
How No Taxes on Tips and Overtime Will Work
Here are some highlights from two hospitality industry legal experts. President Trump signed the mega tax-and-spending bill into law last week. Now details are emerging about what the No Tax on Tips and Overtime elements will mean for both employers and workers within the restaurant industry. Attorneys say specific guidance from the federal government is expected within 90 days of the bill signing on July 4, so more detail is likely before early October. Among those details will be clarity on which workers, specifically, will be eligible for the tax deduction. The law specifies the no-tax-on-tips benefit can only go to workers who are customarily in the line of service, for example. It seems very likely that will include the estimated 2 million restaurant servers and bartenders nationwide. The tax relief for overtime, meanwhile, will impact non-exempt hourly workers more broadly, or an estimated 13 million people, according to the National Restaurant Association. How these deductions will actually work is, frankly, complicated. “It’s going to be a busy year for accountants and people preparing taxes,” said Alden Parker, co-chair of the Hospitality Industry Group for the law firm Fisher Phillips. The tax benefit applies to tipped income and overtime already earned this year—since Jan. 1, 2025—and going forward. But it’s also temporary. The benefits are scheduled to sunset at the end of 2028, though it’s possible they could be extended at that point, notes tax attorney Marvin Kirsner, a shareholder in the law firm Greenberg Traurig. Here is their advice about what employers should expect…
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Ready to Sell Your Restaurant?
Here’s what you should know. In many ways, selling a restaurant is no different than selling a business in any other industry. Every sale requires addressing certain business fundamentals: improving profitability, creating a repeatable business model, identifying growth opportunities, and reducing dependence on key staff who may leave after the sale. But those tasks carry some unique challenges for restaurateurs who want to make the most profitable exit from their business. Here’s how you can cash out and walk away with a satisfying profit. Before hanging a “For Sale” sign, look closely at your business to be sure it stands out from the competition and is worth more than others in the market. That’s the great challenge of this industry, where the competition for buyers can be as tough as it is for customers. At any one time, restaurants make up as much as 25 percent of businesses up for sale – no surprise, considering the industry’s lower-than-average profit margins, high staff turnover and limited growth potential for single-location eateries. Many are selling for pennies on the dollar. Differentiating yourself is about value, not identity like branding, décor or cuisine style. Problems need to be fixed, of course, but changing the basics will only turn off potential buyers – they want a tried-and-true model with room for growth, not a whole new business. Your buyer should also avoid changing anything in the first six months of ownership, instead spending that time getting to know the company and learning as much as they can about what’s working and what’s not. This status quo period also gives guests and employees time to get to know the new owner without fear of change – humans hate change. To stand out to potential buyers, work on the fundamentals. Raise profitability by cutting expenses and scrutinizing prices to be sure you’re charging what you should. Streamline operations and processes to offer a business model the next owner can pick up and run with. How’s your staffing? Are you short-staffed, so guests are waiting in long lines, and the dining room is messy and unclean?…
Why Building Business Credit Should Be a Priority for Your Restaurant
Seven reasons to make business credit a priority. Though he has a degree in business administration, building business credit wasn’t in Clarence Adams’ course work. He wishes he had learned about it earlier. “I think knowing the information when you’re going into it would be wonderful,” he says. He and his wife Joi own two businesses: including their newest, an Italian ice shop in Fayetteville, GA. They started their first business with cash, but when it came to building The Icy Spot GA, they tapped personal credit for some of their startup costs. They are now in the process of moving locations to one with more opportunity for foot traffic. “It feels like we have to start over,” said Adams. He’s responsible for more of the renovations, there will be a new set of inspections, and he’s paying close attention to details like creating a more attention-getting logo. “All while running another business,” he notes. Despite the challenges, they are determined to get to the next level. Like the Adams,’ most business owners aren’t taught how to build or leverage business credit when they start out. It’s not a complicated process, but it’s also not terribly well known or transparent. 1. Rising Food Costs Are Straining Restaurant Finances. According to TouchBistro’s 2025 State of Restaurants report, food costs remain the number one source of financial strain for restaurant owners, with 26 percent citing it as their biggest financial challenge. The report found operators are spending an average of 34 percent more on food costs compared to last year. Strong business credit gives you access to better financing options precisely when you need them—to manage those purchases or maintain cash flow during seasonal fluctuations. Rather than turning to personal credit cards that may carry high interest rates, or expensive merchant cash advances, a good business credit history can open up access to more affordable options. 2. Most Restaurants Are Taking on More Debt.
The restaurant industry has seen a substantial increase in debt levels. TouchBistro’s research reveals that 78 percent of full-service restaurants currently carry some debt—up from 68 percent last year. Even more telling, 42 percent of operators reported taking out loans in just the past six months. With interest rates remaining higher than in recent years, the quality of your business credit can impact how much you’ll pay to service debt. A strong business credit profile could mean the difference between manageable financing costs and interest payments that drain profits…
Why Back-of-House Clarity for Restaurants is Key
To navigating an uncertain economy. If there’s one thing I’ve learned over the years I’ve spent running restaurants—and now helping thousands of restaurateurs manage their operations—it’s that uncertainty has a way of wrecking even the best-laid plans. Yes, there’s an element of uncertainty baked into even the best concepts: Restaurant margins are always razor thin and seasonality can swing traffic unpredictably. Restaurant operators do their best to plan for surprises, but when broader economic uncertainty ramps up, the whole equation gets tougher to balance. When consumer confidence drops, restaurants are among the first places people pull back. No one wants to cancel their kid’s soccer sign-up or skimp on the grocery bill, but skipping dining out? That’s an easy call. I remember when the 2008 financial crisis hit. I was running a conveyor-belt sushi spot in downtown D.C., and I saw this scenario play out firsthand: Fine dining got hammered, while fast-casual joints saw business boom. We managed to stay afloat, but it wasn’t easy. The restaurant industry thrives on constant transformation, from tweaking tonight’s menu to jumping on new trends. If you can’t spot change coming and adjust fast, you’re toast. We’re once again operating in economically shaky territory. Consumer confidence is certainly down. But not everything is flashing red. Inflation has cooled somewhat. Unemployment remains low. The signals are mixed, and the truth is, no one knows what’s coming next. This persistent unease follows five years of nonstop curveballs. First, the pandemic flipped the industry on its head. Dining rooms went dark, and we had to completely rework how we operated—rewriting menus, retraining teams, and rebuilding kitchen workflows to handle a flood of takeout and third-party delivery orders virtually overnight. Then came the supply chain breakdown. Food costs shot through the roof. Inventory got unpredictable. One day, you couldn’t get chicken; the next, your produce bill doubled. Overnight, operators had to become procurement experts, juggling price fluctuations, swapping out ingredients, and renegotiating contracts. It was like playing whack-a-mole with your P&L: Every time you solved one problem, another popped up two weeks later. And then came the labor crunch. With restaurants stretched thin, operators had to trim dining room hours, operate with short crews, and ask managers to jump on the line (or step up themselves) just to stay open…
If You Spend More Than an Hour on Payroll, Read This
Owning a restaurant is difficult enough on its own, without the added challenge of managing payroll. With tight budgets and slim margins, many owners try to cut costs by managing tasks like payroll, tip outs, and compliance themselves—often using manual methods or a patchwork of tools. But while you might think this is a cost-effective way to do business, it’s actually a drain on your time and efficiency. Here’s what to do instead. Restaurant owners want to spend less time managing tasks like payroll, but many don’t know how to do it differently. A great way to tell if you have payroll under control is to record how much time you spend on it. If it’s more than an hour per week, you have an opportunity to improve your processes. The ideal scenario is to remove hours spent in areas like this every week so that you can instead put that time toward growing your business. So, how do you get there? Simplification is the answer, and technology can provide it. Oftentimes owners will piece together point solutions to manage a variety of tasks. They might get a point of sale (POS) tool, a payroll tool, an inventory tool, and a scheduling tool, then try to patch them all together. This can vary in effectiveness, especially when tools don’t integrate—often resulting in a clunky, difficult-to-use system. What’s more, it’s almost impossible to train someone else to use a system like this, and it cannot be easily replicated when you decide to scale and launch another restaurant location. The other option is going with one platform that covers all your team management needs. Just watch out for generic systems—some were built for other industries or pieced together through acquisitions, which can still leave you with a messy, disconnected setup. Look for technology instead that has built what you want (e.g., payroll, tip outs, scheduling) in one place and was crafted specifically for the restaurant industry. Payroll isn’t just a managerial issue; it affects everyone. That means if you get it right, everyone wins. It’s clear how managers and owners benefit from streamlined systems that save them time, but employees also appreciate such technology…
Bridging the Gap in Restaurant Management
The Art vs the Business. In restaurants, one of the most common but least talked-about struggles is this: the creative ambition of chefs doesn’t always align with the cold reality of profitability. We see it every day. A chef builds a beautiful dish, sources a specialty ingredient, designs an unforgettable experience—and then slowly realizes they’re bleeding margin. Why? Because the skills that create a memorable plate don’t always translate into a profitable one. That doesn’t mean creativity and business can’t coexist. In fact, the best restaurants make them work together. The secret isn’t compromise—it’s collaboration. Many chefs enter the industry out of a deep passion for food and craft. They’ve trained for years to perfect a sauce, build a thoughtful menu, and deliver hospitality that leaves an impression. What they haven’t trained for is managing labor costs, building a scalable budget, or analyzing the impact of pricing decisions across a multi-unit model. These are completely different disciplines. And yet, the long-term health of a restaurant depends on them being in sync. As an outsourced accounting partner, we step into businesses that are either flying blind financially or stuck in reactive mode. Our job at OCRA is to get our clients the clarity they need to make proactive, creative, and smart decisions. This usually starts by aligning their numbers to their vision. That means real-time reporting, smart forecasting, and customized tools that work for their operation—not generic spreadsheets. We had one client who operated several locations but hadn’t seen a useful report in months. The books were being managed, technically, but nothing was getting through to the people who needed it. Their chefs were pouring themselves into the food, but no one could say how much the effort was costing—or earning—them. Within weeks, we implemented a reporting system that delivered weekly profit-and-loss snapshots, prime cost breakdowns, and revenue trends. Suddenly, decisions were made with purpose. They still took creative risks, but they did so with real data and strategy behind them. Too often, chefs get labeled as bad at business. That’s not fair. They’re not bad at business, they’re just not trained for it. They’re trained in flavor, technique, seasonality, and guest experience. It’s an entirely different skill set. The solution isn’t to force them to become accountants. It’s to surround them with the right partners and tools…
Did You Know?
Which Hat Are You Wearing? Leadership isn’t about sticking to one mindset—it’s about knowing when to shift. The key is being able to switch with intention. It’s a typical Friday night. The expo line is backed up. A new hire has called out. You’re juggling a last-minute delivery issue while fielding two employee concerns before close. In these moments, who are you? A manager, a leader, or a coach? Most restaurant leaders default to one role, often the manager—focused on immediate tasks and problem-solving. But to build resilient, high-performing teams, it’s essential to balance all three roles: managing operations, leading with vision, and coaching for development.
Employee Tip
How Reflective Listening Can Motivate Teams and Inspire Trust. While building out my workshop, I asked a friend to sit and give me feedback. She’s the Director of People Operations at a restaurant group. She’s naturally empathetic, a good listener and obviously, endlessly patient as she made it through the entire presentation, practice exercises included. When we got to the skills-building part, I gave her a sample scenario to practice her reflection: “I feel like I’m drowning in deadlines. No matter how hard I work, something always slips through the cracks. She looked me dead in the eyes and said, “Have you tried delegating?” I laughed. “We just spent 45 minutes learning how to listen,” I said. “Reflective listening. Labeling the emotions, paraphrasing what you heard?” She shrugged. “I’m a problem solver”…
