Congress Passes Restaurant Tax Priorities | Advocacy in Action

Breaking News: July 3, 2025

Congress Passes Restaurant Tax Priorities

Today, the US House passed the tax and spending reconciliation bill, sending it to President Trump’s desk for signature. This bill contains lots of different provisions on Medicaid, immigration, government spending, and more, but below is a focus on the tax provisions that will impact the restaurant industry.

Included, are key, permanent issues that restaurant operators, the Connecticut Restaurant Association and the National Restaurant Association advocated for over the past two years, ensuring the best outcome for the hospitality industry.

What does this mean for you?

Restaurants and other local businesses will benefit from greater financial predictability and work capital, including:

• Pass-through Tax Deduction: This makes the 20% qualified business income deduction permanent (no lapse after 2025), maintaining tax relief for restaurant operators. 

• Full Expensing for Capital Equipment: Extends 100% bonus depreciation permanently, so restaurants can immediately write off new capital investments (ovens, fryers, furniture, renovations) rather than slowly depreciating over years. Importantly, this change is retroactive to January 20, 2025.

• Business Interest Deduction Fix: Reinstates the original business interest expense limitation formula (based on EBITDA rather than EBIT) on a permanent basis. Capitalization would not be included as business interest.

• Shift Meals Deduction Protected: Clarifies that free or discounted employee meals remain deductible under IRC §274(e)(8), codifying a full write-off for staff “shift meals.”

• Estate tax relief: Prevents the often-overwhelming tax hurdles that force families to sell or close a restaurant rather than the next generation continuing to operate it.

• No Taxes on Tips/Overtime: Both provisions apply for tax years 2025-2028 and are phased out for individuals whose income exceeds $150,000 (or couples whose income exceeds $300,000).

  • • No Taxes on Tips: Employees may deduct up to $25,000 in tips from their taxable income each year. 

    • No Taxes on Overtime: Employees may deduct up to $12,500 in overtime pay from their taxable income each year. 

With different tax provisions expiring, many of these wins are critical to preventing a tax hike for restaurants. The bill not only restores key deductions, but in several instances, it makes them permanent.