There has been a fair amount of chatter and content from various groups about the One Big Beautiful Bill Act (OBBBA) and the impacts on EMS organizations and their employees. It is important to recognize that many of the specific details about how some of the provisions in the Bill may be implemented have yet to be determined. Most importantly, multiple elements will require further regulatory guidance and administrative rulemaking before they fully come into practical play.

Despite there being little clarity in how these provisions will be implemented practically, we will try to provide some insights on the provisions of the OBBBA that will likely impact EMS employers and their employees. Again, while some of the provisions of the OBBBA technically start in 2025, neither employer or employee will meaningfully experience any of the OBBBA impacts until the first or second quarter of 2026. As we have seen over the last seven months, a great deal can happen between now and then.

Tax Breaks & Take-Home Pay Boosts

This is the provision in the OBBBA that has received the most attention from EMS employees. Because of the critical workforce shortage EMS is experiencing, many EMS agencies and employees rely on overtime to ensure that we can provide mobile healthcare services to the communities and patients we serve. Despite this exciting provision, employees will not realize any meaningful financial benefit from this until they file their taxed returns in 2026.

• Federal tax deduction (not full exemption) for the “premium” portion of overtime pay—such as the extra half of time-and-a-half-earned from January 1, 2025, to December 31, 2028.
• Annual limits:
• Up to $12,500 for single filers.
• Up to $25,000 for married couples filing jointly.
• Income phase‑out thresholds:
• Begins phasing out at $150,000 Modified Adjust Gross Income (MAGI) (single) and $300,000 MAGI (joint)
• While there was a great deal of attention in the media about no federal income tax on tipped wages, this will not impact EMS employees, unless they have a second job in the hospitality or tipping industry.

Family & Child Support

• Expanded Child Tax Credit - raised to $2,200 per child, indexed to inflation (up from $2,000), continuing through at least 2028.
• Enhanced Dependent-Care & Childcare Credits - EMS employers can now claim up to 50% credit for childcare spending (max $600,000/year for small businesses; $500,000 for larger firms), spurring more employer-provided care.
• Dependent Care FSA - Starting January 1, 2026, the annual employer-compatible Dependent Care FSA limit increases from $5,000 to:
• $7,500 for married/joint filers
• $3,750 for married/separate filers
• These funds can be used pre-tax for qualified childcare or eldercare expenses.

Educational & Retirement Perks

• Permanent tax-free student loan repayment - employers can reimburse up to $5,250/year toward student loans, under a Section 127 educational assistance program, indexed for inflation, with permanent status starting 2026.
• "Trump Accounts" for kids - this is akin to an IRAs for children born 2025-2028: automatic $1,000 government contribution plus up to $5,000/year tax-deferred contributions. These accounts do not start until July 2026.

Government Contribution

• Initially funded by a one-time $1,000 contribution from the federal government into an eligible child’s account upon birth or account creation.

Parental Contributions

• Parents (or relatives) can contribute up to $5,000/year per child using after-tax dollars. These grow tax-deferred until use, similar to a 401K.

Employer Contributions

• Employers may contribute up to $2,500/year per child tax-free, under a qualified written plan similar to a Section 127 program. That amount is indexed for inflation starting after 2027.

Health & Welfare Enhancements

• HSAs and Telehealth - improved eligibility and expanded telehealth coverage effective in 2025, with other benefits rolling out in 2026.
• Paid Family & Medical Leave Credit - the OBBBA permanently extends the tax credit for employers offering paid family and medical leave, beyond its prior sunset in 2025. Under the law, companies can claim up to 25% credit on wages paid, with eligibility after six months (down from a year), and state-mandated leave qualifies.

Transportation Benefits

• Qualified transportation coverage preserved - bicycle commuting reimbursements remain deductible for employees, though other fringe benefits like parking/transit remain unchanged.
• Auto loan interest deduction - up to $10,000/year deductible on loans for U.S.-assembled cars (for incomes under specific limits) through 2028.

Financial Security & Savings

An additional provision that will not affect your current employees but may impact your retirees is additional tax relief for seniors collecting Social Security benefits. Due to changes made earlier this year to who may collect Social Security benefits, these provisions have broader benefits for EMS and public safety workers.

• Earlier this year, the Social Security Fairness Act was signed into law, which eliminated the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These provisions had reduced payments for about 2.5-3 million public-sector workers (teachers, firefighters, police, postal employees, etc.). Under this change, some public sector employees will see payments from Social Security which for they were not previously eligible.
• Social Security tax relief for seniors - seniors can claim a $6,000 deduction on Social Security income.

What Actions Should EMS Employers Take Now?

There are not any meaningful actions that EMS and public safety employers to take today. Many of the provisions outlined above require rulemaking and guidance from the IRS and other regulatory agencies to operationalize the OBBBA’s benefits. We will continue to monitor the regulatory actions related to the OBBBA and will keep members posted so that they may be prepared.

As always, if you have questions about this, or any human resources or workplace issues impacting EMS, please contact smoore@wmklawgroup.com.