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The basics:

• One Big Beautiful Bill Act makes major business tax provisions permanent
• QBI deduction, bonus depreciation and R&D expensing create new planning strategies
• SALT cap relief benefits New Jersey and other high-tax states
• Tax experts urge SMBs to shift to long-term, strategic tax modeling

The federal One Big Beautiful Bill Act reshaped the tax landscape for small and mid-sized businesses, especially in the Garden State. Tax professionals say the new regulations replace uncertainty with permanence and transform how companies should approach tax strategy.

“The OBBBA is generally business-friendly, regardless of the size of your organization,” said Brian Lioce, an Iselin-based tax partner at the global multidisciplinary professional services organization Ernst & Young LLP, and the firm’s Metro NY Global Compliance & Reporting leader. “From the changes to IRC 250 [foreign-derived deduction eligible income] for organizations that may have a global footprint to the expansion of the benefits typically applicable to smaller domestic companies under IRC 1202 [partial exclusion for gain from certain small business stock], the spirit of the legislation was to drive U.S. investment at all levels.”

The regulations create immediate planning opportunities for both calendar-year and fiscal-year businesses, he added. “Companies should take a fresh look at their balance sheets to evaluate whether opportunities exist to change the timing of certain expense or income items. This advice would apply whether you are a calendar year or fiscal year end company, as there is some flexibility in how and when to change your historical methodologies.”

Traditional tax planning strategies – deferring revenue and accelerating expenses – are still valid, but the complexity of OBBBA’s provisions requires more sophisticated analysis, Lioce emphasized. Several provisions delivered benefits to small- and medium-sized businesses. “The permanent extension of the qualified business income deduction under IRC 199A, with higher phase-in thresholds for limitations, provided welcome certainty,” he observed.

The QBI deduction generally affects “pass-through entities” – primarily self-employed individuals, partnerships and other business owners – where profits and losses are “passed through” directly to the owners’ personal income tax returns, rather than being taxed at the business level. The regulation generally allows them to reduce taxable income by deducting up to 20% of their qualified business income.

New Jersey-based SMBs and those in other high-tax states also gained significant relief through SALT (State and Local Tax) deduction changes, according to Lioce. “The OBBBA introduced temporary relief to the prior $10,000 SALT cap. with a new cap of $40,000 starting in 2025,” he detailed. “The cap increases 1% annually until reverting to $10,000 in 2030, subject to income-based phase-outs. Critically, the passthrough entity tax workarounds [which generally allows qualifying businesses to pay state income taxes at the entity level rather than at the individual owner’s level] were not eliminated or restricted under the legislation.”

One surprise element may catch many organizations off guard. The OBBBA established a “floor” for deducting charitable contributions, Lioce revealed. Beginning in 2026, charitable contributions are generally deductible only to the extent they exceed a percentage of income: 0.5% for individuals and 1% for corporations. Though in both cases, “income” may be subject to certain calculations. Lioce recommended that organizations, in particular, consider accelerating subsequent years’ planned contributions to reduce the unfavorable impact of the new 1% floor.

Looking ahead, he said he doubts that significant additional corporate tax legislation in 2026 is in the cards. “The largest items that our administration campaigned on were passed as part of OBBBA, so I believe it is unlikely we will see anything significant passed on the corporate tax side in 2026,” Lioce said. However, he noted that everyone is “anxiously waiting for OBBBA regs … to help interpret some areas of the statute that are somewhat unclear.”

Still time for planning

On Jan. 1, 2026, the 2025 tax-planning window may have already closed for calendar-year businesses, but “meaningful opportunities still remain available,” explained Tony Torchia, a managing director at the national professional services advisory firm CBIZ. “Post-year-end elections, accounting method changes and pass-through entity tax elections could still be leveraged well after Dec. 31. So even though the calendar year closed, tax results are still very much in motion.”

“The OBBBA didn’t just change tax rules — it changed how businesses should plan,” added CBIZ Managing Director Lee Sheilds. “With fewer sunsets and more permanence, tax strategy has become less reactive and more strategic.”

The legislation made several critical provisions that previously required constant congressional renewal permanent, he added. “Notably, it permanently restored immediate deductibility of domestic research and experimentation expenses under IRC §174A, locked in 100% bonus depreciation, and made the 20% qualified business income deduction a permanent fixture of the tax code.”

Fiscal-year taxpayers gained greater flexibility, noted Sheilds, since they can “still time capital expenditures strategically and optimize interest expense deductions under relaxed IRC Section 163(j) rules, which began calculating limitations using EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) rather than EBIT (Earnings Before Interest, Taxes, Depreciation).”

IRC Section 163(j) generally limits the deduction of business interest expense for many businesses to 30% of adjusted taxable income, which was basically computed as EBIT. But the OBBBA changes the calculation of ATI, essentially allowing businesses to add back amortization (EBITDA), which generally increases ATI, allowing for higher interest deductions.

Benefits and headwinds

Beyond that, the OBBBA also created clear winners among small and medium-sized businesses, added Torchia. “Domestic R&E (Research and Experimental)-heavy companies benefited significantly from immediate expensing coordinated with R&D (Research and Development) credits,” he said. “Professional services firms, including many specified service trades, gained from the permanent QBI deduction, with expanded phaseouts and increased planning certainty.”

Conversely, some businesses faced headwinds. Clean energy and electric vehicle-related companies saw reduced or eliminated credits, while foreign R&E-heavy firms remained subject to lengthy amortization periods.

The legislation also changed how traditional tax planning strategies should be evaluated. While deferring income and accelerating deductions remain valid approaches, the calculus shifted. “The question is no longer, ‘Can we deduct this now?’ but rather, ‘Should we?'” Torchia emphasized. “Permanent expensing provisions reduced the urgency of immediate deductions, while excess business loss rules sometimes limited benefits from aggressive acceleration.”

Looking forward, he said, further “major structural tax changes appear unlikely in 2026. However, businesses are advised to expect continued IRS scrutiny around R&E credits, state-level divergence from federal rules, and possible adjustments tied to trade and international tax matters.”

As Sheilds sees it, the most significant shift was strategic rather than tactical. “Multiyear modeling matters more than one-year deferral tactics,” he observed. “Entity selection should be revisited, especially where QBI, qualified small business stock, or reinvestment strategies are in play.”

Long-term impact

The OBBBA will have “broad impact not only in 2025 and 2026 but in years to come,” according to Robert Trenery Jr., a tax partner at the audit, tax and advisory services firm KPMG. “It permanently extends and modifies key provisions of the 2017 Tax Cuts and Jobs Act, while also introducing new reforms.”

The new legislation is characterized by staged implementation, with different provisions taking effect through 2025, 2026 and 2027, he explained. Major changes include immediate expensing of qualified property through 100% bonus depreciation, modifications to domestic research expenditure treatment, and significant alterations to U.S. international tax provisions

For calendar-year businesses whose 2025 tax year already closed by the time the full implications became clear, opportunities for strategic planning remain available, he added. “While the ‘tax’ or ‘fiscal’ year may have ended, there is still time to model out the impact of not only tax law changes but incorporating changes from a business perspective,” Trenery explained. “Just because the year may have ended, a lot can still be done prior to filing a tax return.”

Traditional tax planning strategies – deferring income and accelerating deductions – are relevant, though the calculus is now more nuanced. “The idea of ‘traditional’ versus ‘reverse’ tax planning [accelerating income recognition or deferring deductions] elevates to another level,” he noted. “Now more than ever, tax modeling is a priority. Some businesses may find advantages in accelerating income and deferring deductions depending on their specific circumstances.”

The OBBBA also created distinct winners and losers among SMBs. “Capital-intensive businesses and innovators, particularly in technology and biotechnology sectors, gained significant tax benefits,” Trenery detailed. “Conversely, green energy and electric vehicle businesses are facing headwinds as the legislation accelerated phase-outs or repealed certain energy credits.”

Ideal time for strategic review

He emphasized that the new year offers ideal opportunities for strategic review. “Working with tax advisers, businesses can outline key objectives that consider both current and future business profiles,” he said. “Critical considerations include evaluating tax accounting methods; assessing eligibility for credits like Research & Experimental Expenditures; and reconsidering business structure choices between S corporations, C corporations, and limited liability companies.”

The tax matters checklist for SMBs expanded significantly under the new regime, he added. “Businesses need to work with their tax advisers to evaluate built-in losses in stock or debt, net operating loss issues, proper application of tax accounting methods, and various elections including Section 338 provisions and state-specific passthrough entity tax elections,” explained Trenery. “State nexus considerations and multinational reporting requirements will add further complexity. So early and upfront dialogue with your tax adviser, and tax modeling are essential.”

While calendar-year businesses can still take advantage of 2025 tax planning, fiscal-year businesses have even more flexibility, according to Martin Abo, founder and member of Abo and Co. LLC, Certified Public Accountants. “For calendar-year companies, the focus now shifts to retroactive optimization,” explained Abo. “The main piece of advice I would put forth is to review any last-minute deductions or credits that could be claimed retroactively, such as R&D expenses, bonus depreciation, and Section 179 expensing.”

Bonus depreciation and Section 179 expensing generally allow businesses to immediately deduct the cost of qualifying assets, like equipment, allowing a business to quickly reduce taxable income.

Although certain improvements to nonresidential real property may not qualify for bonus depreciation, they may still qualify for the Section 179 deduction. And while a Section 179 deduction is subject to certain spending and income limits, bonus depreciation generally doesn’t have a spending or income limit and can generally be claimed even if a business has a net loss.

“The clear winners from the 2025 tax act include companies with domestic research and development expenses, since qualified R&D expenses can generally be expensed immediately, improving cash flow and incentivizing innovation,” according to Abo. “And returns from 2022 through 2024 may generally be amended to claim them. Other winners include certain professional services firms, which may benefit from the expanded QBI deduction.”

On the other side, “architecture and engineering firms, accountants, lawyers, doctors, consultants, financial planners and even actors remain generally excluded from the QBI deduction as specified service trades,” noted Abo. “So, eligibility and phaseout thresholds for QBI and immediate expensing should be reviewed. Also, high-income taxpayers face new limitations on itemized deductions, and businesses relying on clean energy credits saw many incentives rolled back.”

The good news

But successful business owners – or individuals who have sold their business for a substantial sum – and other wealthy people will be cheered by a change to the dreaded estate tax. “Now, up to $15 million per person, indexed for inflation, may generally be passed tax-free to heirs,” he said. “With estate tax exemptions of up to $30 million for a couple and permanent tax cuts in individual brackets, significant tax-free transfers of wealth should be available.”

Despite the number of changes, “I believe traditional tax planning is still valid,” added Abo. “The classic strategy of deferring revenue and accelerating expenses appears to hold true. While monitoring for technical corrections and IRS guidance remains prudent, businesses should be able to plan with greater confidence in 2026.”