New Jersey's tax landscape for 2025-2026 includes several changes that directly affect small businesses and individuals: updated BAIT election rules, 100% federal bonus depreciation made permanent under the OBBBA (signed July 4, 2025), minimum wage increases affecting payroll costs, and expanded IRS enforcement targeting pass-through entities. Greg Monaco, CPA monitors these changes throughout the year and adjusts client strategies accordingly.
Tax law evolves every year. Here are the key changes for NJ small businesses and individuals. For a detailed breakdown of the NJ exit tax, see our complete NJ Exit Tax guide.
NJ BAIT Updates
The BAIT continues with rates aligned to NJ individual brackets. The election is still made annually on the entity return.
Federal Bonus Depreciation: Now Permanent Under the OBBBA
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made 100% federal bonus depreciation permanent for qualified property placed in service after January 19, 2025. The prior TCJA phase-down (60%→40%→20%) no longer applies. NJ still does not conform to federal bonus depreciation regardless, so NJ businesses continue to depreciate assets over their useful life on the NJ return.
NJ Minimum Wage Increases
Scheduled increases affect labor costs and payroll tax calculations.
IRS Enforcement Expansion
More audits, more collection activity, more scrutiny of pass-through entities. NJ businesses should ensure records are audit-ready.
What Should NJ Businesses Do About These Tax Law Changes?
Review your tax situation with your CPA at least once during the year, not just at filing time.
Key Takeaway
Tax rules change every year at both the federal and NJ level. The businesses that benefit most are the ones reviewing their tax position proactively with a CPA during the year, not just at filing time. Schedule a mid-year check-in to ensure your estimated payments, entity structure, and deduction strategies reflect current law.
Related reading: NJ BAIT Election | Quarterly Estimated Taxes in NJ | Section 179 and Bonus Depreciation in NJ | Tax preparation services
## Frequently Asked Questions
What is the NJ BAIT election and has it changed for 2025?
The NJ Business Alternative Income Tax (BAIT) allows pass-through entities to pay state income tax at the entity level, enabling owners to deduct the payment as a business expense and bypass the federal $10,000 SALT deduction cap. The BAIT continues for 2025 with rates aligned to NJ individual tax brackets, and the election is made annually on the entity return.
Is federal bonus depreciation still phasing down?
The OBBBA signed July 4, 2025 made 100% federal bonus depreciation permanent for property placed in service after January 19, 2025, reversing the TCJA phase-down. However, NJ does not conform to federal bonus depreciation regardless, so NJ businesses must still depreciate assets over their useful life on the NJ return.
How does the NJ minimum wage increase affect my business?
NJ minimum wage increases affect labor costs, payroll tax calculations, and potentially overtime thresholds. Business owners should update payroll systems, review labor budgets, and consider the impact on quarterly estimated tax payments. The increases apply to most employers, with limited exceptions for seasonal and small employer categories.
Should I schedule a mid-year tax review?
Yes. A mid-year tax review allows your CPA to adjust estimated payments, evaluate whether your current entity structure is still optimal, and implement tax-saving strategies before year-end when options are limited. This is especially important in years with significant tax law changes at either the federal or NJ level.
