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Summary: As April 15 approaches, McDonald’s franchisees must prepare for the complexities of preparing the necessary financial and tax requirements, especially with the passing of the One Big Beautiful Bill. The upcoming April 15 deadline will not only require regular filing obligations but also introduce new opportunities stemming from the OBBB, which will bring a range of essential tax and labor updates that could impact how your McDonald’s franchise operates and how individuals file their tax returns.

The big picture shows that the OBBB provides a wide range of tax and labor updates in one package. We are seeing new payroll and labor rules, particularly regarding tips and overtime, along with some expanded deductions, elections, and permanent and temporary provisions from the 2017 tax law. This impacts almost everybody in the restaurant, franchise, and hospitality industries. Some are temporary opportunities, while others are permanent structural changes that will shape the planning moving forward for all of us.

In this article, we take a closer look at a few key provisions that will help McDonald’s franchisees stay informed and proactive in navigating these tax developments.

What Does the OBBB Mean for the Restaurant, Franchise, and Hospitality Industries?

The OBBB was signed into law on July 4, 2025, and is effective for tax years starting in 2025. There are changes in the new payroll and labor rules (tips and overtime), expanded deductions and elections, and permanent updates to several Tax Cuts and Jobs Act (TCJA) provisions. The nature of provisions encompasses a mix of temporary opportunities (such as credits and deductions) and permanent structural changes. This law impacts employers and employees across the restaurant, franchise, and hospitality industries, and specific rules and compliance requirements may evolve.

Temporary deductions will apply for the next three tax years, ending December 31, 2028.

What Are the Updated Overtime Rules?

Overtime has always been a compliance challenge and a tricky subject. For the first time, there is a federal tax deduction explicitly tied to the premium portion of overtime under the Fair Labor Standards Act (FLSA). Effective January 1, 2025, through December 31, 2028, a federal tax deduction will be available for the premium portion of overtime pay for hourly, non-exempt employees, such as servers, bartenders, cooks, housekeepers, and front desk staff. Employers must begin tracking and qualifying overtime separately, with a specific focus on hours worked in excess of 40 per week.

While reasonable estimates are acceptable for 2025, accurate record-keeping will be mandatory for subsequent years. It is essential to update your current payroll system to include a dedicated overtime field, enabling employers to account for aggregate hours across multiple locations under common ownership. This is because all hours contribute to the 40-hour threshold. Carefully tracking overtime, aggregating hours across all entities, and assuring accurate reporting are key to navigating this provision, which is both a compliant requirement and a new deduction opportunity.

The 1099-NEC & MISC

Another significant change revolves around the 1099s. In 2026, the threshold for the 1099-NEC (non-employee compensation) & 1099 MISC will increase from $600 to $2,000. However, the $2,000 threshold is subject to annual inflation adjustments. Starting with your 2026 payments, you will issue a 1099-NEC to vendors that meet the threshold criteria. If you have a vendor that you pay in smaller amounts and don’t often pay, you are required to issue them a 1099-NEC for 2025, but not in future years.

The 1099-Ks are what you receive from your third-party merchants. It is also reverting to its original rules and is only warranted if they meet the criteria of $20,000 plus 200 transactions. This may not have a significant impact on the McDonald’s world, as owners/franchisees typically process much higher volumes. On the other hand, if you purchase a store on December 15 and you do not have $20,000 worth of third-party merchant receipts plus 200 transactions between December 15 and 31, you may not receive a 1099-K for that tax year.

Understanding the amount threshold is essential, especially if you do 1099s in-house, and account for potential threshold changes in the coming years.

The Bonus Depreciation

The passing of the One Big Beautiful Bill presents a significant win for small businesses. Under the new law, changes have been made to the bonus depreciation and Section 179 provisions, particularly with the introduction of 100% bonus depreciation on qualifying assets. Qualifying assets include equipment, machinery, and capital improvements, as well as acquisitions made when you purchase a store. There is also a special allowance for certain property under IRC §168 (k).

Previously, the limit for bonus depreciation in the 2025 tax year was 40%. With the OBBB, any assets you have placed in service since January 19, 2025, you can take 100% bonus depreciation on them. Assets placed in service before January 19 are still qualified (but limited to) the 40% bonus depreciation. Bonus depreciation is a valuable tax planning tool that enables you to fully depreciate assets as soon as they are put into service.

Ultimately, bonus depreciation will help you manage your taxable income and cash flow, utilizing that cash for improving business operations, such as staffing and growth, rather than paying a large tax liability.

The Section 179

The recent change to Section 179 also presents a significant win for business owners. The deduction limit has doubled from $1.25 million to $2.5 million, offering an opportunity for greater tax savings on capital investments.

Tax Years Deduction Allowed
2025 (OBBB) $2,500,000
2024 $1,220,000
2023 $1,160,000
2022 $1,080,000
2021 $1,050,000
2020 $1,040,000
2019 $1,020,000
2018 $1,000,000

Additionally, the investment limitation has increased from $3 million to $4 million, making this a valuable strategy for larger franchisees or those with multiple locations. Section 179 can be particularly advantageous for larger projects.

Tax Years Investment Limit
2025 (OBBB) $4,000,000
2024 $3,050,000
2023 $2,890,000
2022 $2,700,000
2021 $2,620,000
2020 $2,590,000
2019 $2,550,000
2018 $2,500,000

When utilizing Section 179, businesses need to have taxable income to take advantage of the deduction. For instance, if a company invests heavily in a property remodel and wants to refrain from reporting a loss, it may be wise to strategically plan the use of depreciation—opting for certain asset classes to be excluded from it—and reserve the depreciation benefits for future years.

Section 179 and bonus depreciation provide strong incentives for McDonald’s franchisees to consider in their tax planning. When working with your CPA in planning your tax liability, you may choose to elect bonus depreciation for 39-year and 15-year asset classes. You can also utilize Section 179 to reduce your taxable business income to nearly zero or to a minimal amount. These tax toolkits are available to help you save on depreciation for future years while effectively lowering your taxable income in the current year, thereby managing your tax liability.

What Are the Changes on the Interest Expense Deduction Section 163(j)?

The OBBB and §163(j) present bigger interest deductions. Under the OBBB, it is now based on earnings before interest, taxes, depreciation, and amortization, also known as EBITDA, which means depreciation and amortization get added back. A higher adjustable taxable income increases your deduction. For example, suppose an owner/operator’s deductible interest rises from $1 million in 2024 to $1.5 million in 2025 under the new rule, which reinstates depreciation and amortization. In that case, their taxable income will decrease, resulting in lower taxes.

The §163(j) changes are permanent, which significantly impacts capital-intensive businesses, such as McDonald’s, where depreciation is substantial. There are available opportunities with bonus depreciation and Section 179 for upcoming projects, such as lobby remodels. Having these deductions from the adjustable taxable income enables greater interest deductions.

Are There Any Changes in the Qualified Business Income (QBI) Deduction?

Before the passing of the OBBB, the QBI deduction was set to expire after 2025. The QBI lets taxpayers deduct up to 20% of their qualified business income from pass-through entities, including LLCs, S-Corps, partnerships, and sole proprietorships. With the passing of the permanent QBI, you now only have to pay your tax liability on 80% of your business income, rather than 100%.

Most owner/operators operate at the pass-through entity level, so this could be considered a significant win. Unlike other provisions in the bill that require spending to get a deduction or credit, the QBI deduction doesn’t require any expenditures. It applies to your current circumstances, making it a valuable planning tool. Previously, we anticipated higher tax liabilities if the 20% QBI deduction were to end, but its continuation is a positive development for cash flow projections.

Other OBBB Highlights

1. TCJA Provisions Will Continue

The pre-2017 TCJA provisions will remain in effect as the standard deduction continues to rise. For 2025, the standard deduction will increase to $15,750 for individuals and $31,500 for joint filers. Taxpayers aged 65 and older will receive an additional standard deduction in addition to these amounts. Tax brackets that were in place before the OBBB was passed are now permanent, meaning the top tax rate will remain at 37%.

The child tax credit has been increased to $2,200 for qualifying families. Additionally, there is an increase in the state tax exemption. For 2025, the exemption will remain at $13,499,000 (almost $14 million) per individual, letting couples to give away nearly $27 million in total potentially. However, this amount will be adjusted for inflation—starting in 2026, the exemption will increase to $15 million per individual, which means a couple could transfer $30 million tax-free.

2. Increase SALT Deduction Cap

The SALT deduction cap has been temporarily increased from $10,000 to $40,000. Unfortunately, it will revert to $10,000 after five years. The $40,000 deduction is subject to income limitations, with the phase-out beginning when modified adjusted gross income exceeds $500,000 for joint filers and $250,000 for single filers. For taxpayers with higher income levels, the SALT deduction will not fall below the original $10,000 threshold.

3. Expanded 529 Education Savings

The 529 education savings plan withdrawal limit for K-12 expenses has increased from $10,000 to $20,000, effective for tax years beginning in 2026.

4. “Trump/MAGA Accounts”

The newly introduced Trump MAGA accounts are designed for children born between 2025 and 2028, with the government providing an initial $1,000 contribution to start. Parents, family members, and friends can contribute up to an additional $5,000 per year to the child’s plan. These plans function similarly to ROTH IRAs, where funds can grow tax-free and can be withdrawn when the child turns 18. Withdrawals from these accounts are limited to specific uses for them to remain tax-free, including education expenses or a first-time home purchase.

For anyone expecting a child between 2025 and 2028, take advantage of the initial $1,000 contribution and encourage family members to contribute up to the annual limit of $5,000. This way, you can secure funding for your child for important life milestones while minimizing tax implications.

5. Auto Loan Interest Deduction

A new auto loan interest deduction of up to $10,000 is now available, but it is subject to income limitations and phase-outs. The deduction only applies to U.S.-made cars, which means that if you purchase a Tesla or another electric vehicle that is not manufactured in the United States, you won’t be eligible for the deduction. On the bright side, the deduction is available regardless of whether itemized deductions are claimed.

6. EFTPs (Not Part of OBBB-Executive Order 14247)​

The EO 14247 is an executive order issued by the President in March, mandating that all tax payments and refunds be processed electronically after September 30, 2025. Starting October 1, 2025, all payments to the IRS must be processed electronically, either through the IRS website, an ACH transfer via tax software, or through your tax advisor. We strongly recommend making your tax payments electronically, whether to the federal government or state agencies, for immediate confirmation and accurate payment delivery.

Tax Planning and Strategy

1. Year-End Bonuses

Year-end bonuses provide a straightforward tax strategy for owner-operators seeking to maximize deductions while maintaining a stable cash flow. Many businesses accrue these bonuses as of December 31 and are not required to pay them out until March 15 of the following year for calendar year filers. This is a great way to get the deduction in the current year while retaining cash within the business for an additional two and a half months before the payout.

2. Donor-Advised Funds

Charitably inclined individuals can contribute a larger sum to the fund in a year of significant income and receive an immediate tax deduction. For example, instead of giving $10,000 annually for 10 years to your chosen charity, you could opt to give $100,000 in the current year that you want to get the deduction, receive the deduction, and use the funds for future charitable purposes.

3. Charitable Contributions

Some owner/operators combine their donations due to the increase in the standard deduction. For example, instead of giving $15,000 yearly to your chosen charity, you could donate $15,000 on January 1, 2026, and another $15,000 on December 31, 2026. This way, you can claim the full $30,000 as a deduction in the tax year 2026, and you will be able to itemize and maximize your deduction.

The big picture here is that it may be more beneficial for you to use the standard deduction in the following year and alternate between deductions each year. One year, itemizing deductions may be advantageous, while the following year, opting for the standard deduction aligns with the bunching of donations approach.

4. Gift Exclusions

The annual gift exclusion increases annually with inflation, but is currently set at $18,000 per person and $36,000 per couple, per recipient. It’s considered a tax-free event if you want to gift grandkids $36,000 as a married couple without IRS reporting. You may also want to consider the gift exclusion when planning for your legacy and transferring ownership of the business to your children.

Whether you are making incremental gifts of S-Corp stock up to the annual exclusion amount or transferring larger percentages (gifting 10% of the business), this is a good way to integrate your children into ownership without triggering a taxable event.

5. Retirement Plans

Maximizing any retirement plan, such as a 401(k), can reduce your taxable income. Roth IRAs provide tax advantages but come with income limitations, so it’s essential to consult with your CPA or tax advisor to determine if they’re right for you. On the other hand, traditional IRAs do not have income limitations and may be a greater option for you, depending on your conversations with your financial advisor.

Investing in tax-exempt securities can also be a smart move; however, you’re probably not going to get as much return on investment (ROI) as other types of investment venues.

Final Thoughts: Long-Term Planning for Continued Growth

These tax and provision changes may present new opportunities or planning needs depending on your situation. For the restaurant, franchise, and hospitality industries, the OBBB offers both immediate tax relief and long-term structural reform. It is recommended to work proactively with your tax advisors to take advantage of these opportunities and assure compliance.

How Aprio Can Help


Boost profitability and position your McDonald’s franchise to better serve guests. From restaurants to established multi-location businesses, Aprio provides the back office, financial reporting and business advisory services needed to operate a profitable McDonald’s operation and plan for future growth.

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