The One Big Beautiful Bill Act was signed into law on July 4, 2025 as Public Law 119-21. For New Jersey business owners, OBBB delivers some of the most significant federal business tax changes since the 2017 Tax Cuts and Jobs Act (TCJA). Several core TCJA provisions that were set to expire after 2025 are now permanent. Others were expanded.
This guide explains the OBBB provisions that matter most for NJ small and mid-size business owners. We focus on what is in effect now, the dollar thresholds for tax years 2025 and 2026, and the planning windows that close within the next few months.
Planning information only — not tax advice. Last reviewed against IRS.gov and congress.gov primary sources on 2026-05-28. Tax positions for any individual business should be confirmed under an engagement letter. See Disclaimer.
What OBBB Is — and Why It Matters for NJ Businesses
OBBB is a federal reconciliation bill that was passed by the House on May 22, 2025 and enacted as Public Law 119-21 on July 4, 2025. The IRS has published guidance under the umbrella page at IRS.gov/OBBB.
For New Jersey owners, three themes drive the practical impact:
- Several TCJA provisions that were set to sunset became permanent. The QBI deduction, the Section 179 expensing increase, and the excess business loss limit no longer have a 2025 cliff.
- 100% bonus depreciation is back and permanent. Equipment, vehicles, and qualified property placed in service after January 19, 2025 can be fully deducted in year one.
- Domestic R&D expensing was restored retroactively to 2022. Small businesses with under $31 million in gross receipts have until July 4, 2026 to elect retroactive treatment.
NJ-specific layer: the NJ Division of Taxation has officially clarified that several OBBB individual deductions do not flow through to the NJ Gross Income Tax. We cover this in the NJ section below.
Federal Business Provisions That Matter Most for NJ Owners
100% Bonus Depreciation Made Permanent (IRC § 168(k))
Under TCJA, bonus depreciation was scheduled to phase down to 40% in 2025 and 20% in 2026. OBBB Section 70307 reversed that. Property acquired after January 19, 2025 now qualifies for 100% first-year deduction, with the deduction made permanent going forward.
This is among the most useful OBBB provisions for NJ businesses that buy equipment, vehicles, or qualified property. The Section 70307 changes are documented in the IRS OBBB Business Tax Provisions guidance.
What this means practically:
- A Bergen County contractor buying a $150,000 work truck after January 19, 2025 can fully deduct it in the year placed in service.
- A Hasbrouck Heights medical practice replacing $80,000 of imaging equipment can deduct the full amount in year one.
- A Paramus restaurant outfitting a new location with $200,000 of kitchen equipment can take the full deduction without spreading it over multiple years.
For 2025 returns specifically, the IRS notes a transition election allowing reduced percentages (40% or 60%) if a business prefers a different timing. Interim guidance is in IRS Notice 2026-11.
Section 179 Expensing Raised — and Made Permanent
Section 179 lets a business expense the cost of qualifying equipment up to an annual limit, rather than depreciating over years. OBBB raised the limits and removed the sunset:
- Tax year 2025: $2,500,000 maximum deduction. $4,000,000 investment phase-out threshold.
- Tax year 2026: $2,560,000 maximum deduction. $4,090,000 investment phase-out threshold. Both indexed for inflation each year after.
The SUV-specific limitation was not changed. These figures come from the IRS OBBB Business Tax Provisions page.
Section 179 and bonus depreciation interact. For most NJ small businesses, the practical answer is “use Section 179 first, then bonus.” A CPA can model which order produces the best result for a given purchase mix.
Section 174 Domestic R&D Expensing Restored — Retroactive to 2022
This provision is one of the most under-discussed OBBB changes and one of the most valuable for NJ tech startups, software firms, dental and medical practices doing in-house technique development, and any business with domestic research costs. OBBB Section 70302 added a new IRC Section 174A.
Under prior law (TCJA’s R&E capitalization rules in effect since 2022), domestic R&E costs had to be capitalized and amortized over 5 years. OBBB reverses that:
- For tax years after December 31, 2024: domestic R&E can be deducted in the year paid or incurred.
- Retroactive small business relief: businesses with $31 million or less in average annual gross receipts can elect to apply the new rule retroactively to tax years beginning after December 31, 2021.
- Election deadline for retroactive treatment: July 4, 2026.
- Foreign R&E: must still be capitalized and amortized over 15 years.
For NJ businesses that capitalized R&E costs on 2022, 2023, or 2024 returns, the retroactive election could produce material refunds. The window to make the election is closing — see IRS Revenue Procedure 2025-28 for the election procedure.
Business Interest Deduction (IRC § 163(j)) — Back to EBITDA
OBBB amended Section 163(j) to allow taxpayers to add back deductions for depreciation, amortization, and depletion when calculating Adjusted Taxable Income. In practice, this returns the calculation to an EBITDA basis rather than the EBIT basis that applied since 2022.
The result: leveraged NJ businesses (real estate, equipment-heavy operations, leveraged buyouts) can deduct more interest. The change applies to tax years beginning after 2024. The $31 million gross receipts threshold for the small business exception is unchanged.
The IRS updated its 163(j) FAQ to reflect this. See the IRS 163(j) FAQ update page.
QBI Deduction (IRC § 199A) Made Permanent
The 20% Qualified Business Income deduction was a TCJA cornerstone for pass-through owners. It was scheduled to expire after 2025. OBBB makes it permanent for tax years after 2026 and changes the phase-in thresholds:
- Single filer phase-in range: widened from $50,000 to $75,000.
- Married filing jointly phase-in range: widened from $100,000 to $150,000.
- New minimum deduction: $400 (inflation-adjusted) for taxpayers with at least $1,000 in net qualified business income.
For NJ S-corp and partnership owners who were planning around a 2026 QBI cliff, the permanence matters most. Long-horizon planning — entity selection, salary-vs-distribution decisions, retirement plan design — can now assume QBI continues.
ProAxis maintains a QBI deduction calculator for planning estimates. The calculator is for illustration only — not a tax position.
Form 1099-NEC and 1099-MISC Threshold Raised
For payments made after December 31, 2025, the reporting threshold for Form 1099-NEC and 1099-MISC was raised from $600 to $2,000. The threshold will be inflation-adjusted starting 2027.
For NJ businesses paying multiple contractors, this reduces the 1099 paperwork burden for smaller payments. NJ Division of Taxation has not yet issued separate state-level guidance on whether NJ-1099 thresholds will follow.
Qualified Small Business Stock (IRC § 1202) Expanded
For stock acquired after July 4, 2025, the Section 1202 per-issuer aggregate exclusion limit was raised from $10 million to $15 million. The 100% exclusion for 5-year holding (for stock acquired after September 27, 2010) remains.
This matters for NJ founders, early employees, and investors in qualified C-corp small businesses. The expanded limit and the tiered structure are documented in the IRS OBBB Business Tax Provisions.
Excess Business Loss Limitation Made Permanent
Non-corporate taxpayers cannot deduct excess business losses above the annual threshold; the excess is converted to a net operating loss. OBBB made this rule permanent. The 2026 thresholds:
- Married filing jointly: $626,000
- Other taxpayers: $313,000
For NJ business owners with offsetting investment or W-2 income, this affects how losses can shelter other income in a given year.
Business Meal Deductions Ending for Most Employers in 2026
A change worth flagging: starting in 2026, most employers can no longer deduct expenses for employer-provided meals (the cafeteria/free-meal benefit). Exceptions remain for meals sold to customers, certain marine and fishing operations, and a few narrow categories. Through December 31, 2025, the 50% deduction still applies.
NJ professional service firms and restaurants providing staff meals should review accounting policies before year-end 2025.
NJ-Specific Considerations: What Flows Through and What Does Not
The NJ Division of Taxation issued an official guidance page on OBBB and the NJ Gross Income Tax. The position is clear and deliberate.
NJ Gross Income Tax Decouples from OBBB Individual Deductions
The Division states verbatim that “the New Jersey Gross Income Tax (GIT) has defined categories of income and deductions and is not computed based on federal adjusted gross income, and therefore, federal deductions under the federal OBBBA regarding overtime, tips, and senior citizens do not affect a taxpayer’s New Jersey Individual Income Tax return.”
Source: NJ Division of Taxation — One Big Beautiful Bill Act and the New Jersey Gross Income Tax.
Practical impact for NJ residents:
- The new federal deduction for qualified tips (2025-2028) reduces federal tax. It does NOT reduce NJ tax.
- The new federal deduction for qualified overtime (2025-2028) reduces federal tax. It does NOT reduce NJ tax.
- The new federal deduction for seniors (2025-2028) reduces federal tax. It does NOT reduce NJ tax.
- NJ resident NJ-1040 returns continue to follow NJ’s own income and deduction categories.
For business owners reading paychecks: a server, bartender, or hourly employee with tip income will see federal withholding reflect the new deduction, but NJ withholding will not. Payroll providers should be confirming their NJ withholding tables reflect this decoupling.
NJ BAIT Election: Still the Primary SALT Planning Tool
OBBB did not change the federal $10,000 SALT cap structure for individuals (though the cap was generally extended). The NJ Business Alternative Income Tax (BAIT) election remains the most effective SALT cap workaround for NJ pass-through business owners.
The NJ Division of Taxation’s PTE/BAIT FAQ confirms the election structure is unchanged. The election is annual, due on or before the original due date of the entity’s PTE-100 form (March 15 for calendar-year filers). Estimated payments are due April 15, June 15, September 15, and January 15.
ProAxis covers BAIT election mechanics in depth on the NJ SALT Tax Changes in 2026 post and on the NJ BAIT Election service page.
NJ Corporation Business Tax (CBT) Conformity
NJ’s Corporation Business Tax does follow federal taxable income with NJ-specific modifications. Several OBBB business provisions will flow through to the NJ CBT, including bonus depreciation (subject to NJ’s own depreciation modifications), Section 179, and the Section 174 R&E rules. The NJ Division of Taxation has not yet issued a comprehensive OBBB CBT conformity statement; we are monitoring NJ Division of Taxation New Laws for any update.
NJ businesses operating as C-corps should expect specific NJ CBT guidance over the next several months. In the meantime, plan based on the federal rules and adjust on the NJ side if guidance changes.
What NJ Business Owners Should Do in the Next 60 Days
The OBBB planning window is shaped by two deadlines and several “use it or lose it” decisions.
Section 174 Retroactive Election — Deadline July 4, 2026
If your NJ business capitalized domestic R&E expenses on 2022, 2023, or 2024 returns and has average annual gross receipts of $31 million or less, you may be able to:
- Elect retroactive treatment under new IRC Section 174A
- Recover previously-deferred deductions
- Receive refunds for prior tax years
Five weeks remain before this election closes for July 4, 2026 calendar planning. NJ tech startups, software firms, biotech, and any business with material domestic R&E should review with their CPA immediately.
Equipment and Vehicle Purchases for 2025 Tax Year
Equipment, vehicles, and qualified property placed in service after January 19, 2025 qualifies for 100% bonus depreciation. For NJ businesses considering a Q4 2025 or Q1 2026 purchase, the timing of the placed-in-service date determines the tax year of the deduction.
Practical sequencing: review pending capital expenditures, model Section 179 vs. bonus depreciation, confirm placed-in-service dates against acquisition dates.
QBI Permanence Changes Long-Term Planning
If your S-corp salary or partnership structure was designed around an expected QBI sunset, the permanence changes the math. Revisit:
- S-corp reasonable compensation levels
- Partner guaranteed payments
- Specified Service Trade or Business (SSTB) categorizations
- Aggregation elections
ProAxis covers planning frameworks for these decisions on the Tax Planning service page and through the S-Corp Savings Calculator.
NJ Q2 2026 Estimated Tax Payments Due June 15
Unrelated to OBBB but time-sensitive: federal and NJ second-quarter estimated tax payments are due June 15, 2026. Pass-through entities electing BAIT have the same date for the second BAIT estimate. See our Q2 2026 Estimated Tax Payments guide for the safe-harbor calculation and forms.
OBBB Frequently Asked Questions
What is the OBBB and when was it signed into law?
The One Big Beautiful Bill Act is Public Law 119-21. It was passed by the House on May 22, 2025 and signed into law on July 4, 2025. The full IRS guidance hub is at IRS.gov OBBB provisions.
Does OBBB make the QBI deduction permanent?
Yes. OBBB made the IRC Section 199A Qualified Business Income deduction permanent for tax years after 2026. It also widened the phase-in ranges (single from $50,000 to $75,000; married filing jointly from $100,000 to $150,000) and added a $400 inflation-adjusted minimum deduction for taxpayers with at least $1,000 in net QBI.
Is 100% bonus depreciation back permanently under OBBB?
Yes. OBBB Section 70307 restored 100% first-year bonus depreciation for qualified property acquired after January 19, 2025 and made it permanent. A transition election allowing 40% or 60% percentages is available for 2025 returns through interim guidance in IRS Notice 2026-11.
What is the Section 179 expensing limit for 2026 under OBBB?
For tax year 2026, the Section 179 maximum deduction is $2,560,000 and the investment phase-out threshold is $4,090,000. For tax year 2025, the limits are $2,500,000 and $4,000,000 respectively. Both figures are now permanent and indexed for inflation each year after 2026.
Can NJ small businesses retroactively deduct R&D expenses under OBBB?
Yes, in some cases. Businesses with average annual gross receipts of $31 million or less can elect to apply the new domestic R&E expensing rule retroactively to tax years beginning after December 31, 2021. The election deadline is July 4, 2026. Foreign R&E must still be capitalized and amortized over 15 years.
Do the new federal OBBB deductions for tips and overtime reduce my NJ tax?
No. The NJ Division of Taxation has confirmed that the federal deductions for tips, overtime, and seniors under OBBB do not affect a taxpayer’s NJ-1040 return. NJ Gross Income Tax has its own categories of income and deductions and is not based on federal adjusted gross income.
Did OBBB change the NJ BAIT election?
No. OBBB did not change the structure of state pass-through entity taxes like the NJ BAIT election. NJ BAIT remains the primary SALT cap workaround available to NJ pass-through business owners. The election is annual and due on or before the entity’s PTE-100 filing deadline.
Sources and Primary Materials
This guide cites primary government materials only:
- Public Law 119-21 — One Big Beautiful Bill Act (congress.gov)
- IRS — One, Big, Beautiful Bill provisions
- IRS — OBBB Business Tax Provisions
- IRS — 2026 Inflation Adjustments Including OBBB
- IRS — Section 163(j) FAQ Update
- NJ Division of Taxation — OBBB and the NJ Gross Income Tax
- NJ Division of Taxation — PTE/BAIT FAQ
- NJ Division of Taxation — New Laws
All references verified against the primary source URLs on 2026-05-28.
How ProAxis Helps NJ Business Owners Plan Under OBBB
ProAxis Tax & Accounting Services is a licensed CPA firm based in Hasbrouck Heights, Bergen County NJ, serving small and mid-size businesses across the NYC Metro Tri-State area (NJ, NY, PA). We are licensed in NJ and NY, AICPA members, and Authorized IRS e-File Providers.
For OBBB planning specifically, we work with owners on:
- Section 174 retroactive R&D election analysis (deadline July 4, 2026)
- Bonus depreciation vs. Section 179 modeling for capital purchases
- QBI permanence-driven entity and compensation review
- NJ BAIT election strategy under the post-OBBB SALT framework
- NJ CBT conformity tracking as state guidance is issued
To discuss your business under engagement, schedule a discovery call through the contact page or call 201-800-2330.
General information only — not tax advice. Every business situation is different. The figures cited above are accurate to primary government sources as of 2026-05-28 but are subject to subsequent IRS or NJ Division of Taxation guidance. No CPA-client relationship is created by reading this article. See Disclaimer and Terms of Service for the full terms.