July 24, 2025
If you run a small business in California, you already know how complicated and expensive tax compliance can be. Between high state taxes and ever-changing federal rules, it’s easy to feel overwhelmed — or worse, stuck paying more than your fair share. But there’s some good news on the horizon. The One Big Beautiful Bill Act (OBBBA), signed into law in mid-2025, brings significant, lasting changes to the tax code that can help you reduce your tax burden — if you know where to look and how to plan. This article breaks down the key provisions that matter most to California small business owners and offers practical strategies to start saving today.
California small businesses face some of the highest combined federal and state tax rates in the country. OBBBA’s new rules touch on several core areas affecting your tax bill — including permanent extensions and expansions of important deductions and credits, such as:
These changes create new tax planning opportunities — but only if you’re ready to act strategically.
Since its introduction in 2017, QBID has been a crucial tax break for pass-through businesses like S-Corporations, partnerships, and LLCs. Under OBBBA, this 20% deduction on qualified business income is now permanent, offering certainty that this benefit won’t disappear or shrink unexpectedly.
What does this mean for you? It’s a green light to optimize your business income flow, salary distributions, and entity structure without fearing QBID changes. You might also explore splitting income between multiple trusts or entities where applicable to maximize this deduction — but remember, IRS scrutiny on “income splitting” schemes has increased, so always do this with professional guidance.
If you’re a California business owner, you know the frustration of the $10,000 SALT deduction cap that has been choking many taxpayers since 2017. OBBBA raises this cap to $40,000 for the next several years, easing the tax burden for many.
But there’s more: by structuring income across multiple trusts or entities, you can “layer” SALT deductions — effectively multiplying your total deduction beyond what was possible before. This strategy, combined with careful income shifting, could save tens of thousands of dollars annually.
Capital investments are essential for growth — and OBBBA rewards you for it. The 100% bonus depreciation rule, which allows you to deduct the full cost of qualifying property in the year it’s placed in service, is now permanent. While there will be a phasedown in future years, this gives you a predictable and powerful tool to reduce taxable income and improve cash flow.
Think new equipment, software, vehicles, or renovations — all potentially deductible immediately instead of depreciated over years.
With these changes, it’s a great time to evaluate whether your current entity type still makes sense. For example, S-Corps often provide advantages on self-employment taxes and salary distributions that work hand-in-hand with QBID. Conversely, creating separate LLCs or non-grantor trusts might multiply your SALT deductions legally.
Professional advice is crucial here to balance tax savings with administrative complexity and compliance risks.
California’s PTET election lets pass-through entities pay state income tax at the entity level, bypassing the SALT deduction cap entirely for owners. Paired with OBBBA’s SALT cap increase, this can significantly reduce your individual tax liability.
However, PTET comes with its own rules, deadlines, and filing requirements — so working with a CPA experienced in this area ensures you don’t miss out or make costly errors.
If you’re planning to buy equipment or upgrade your office this year, the 100% bonus depreciation can immediately reduce your taxable income. Consider timing purchases before year-end or bundling multiple investments to maximize the deduction.
“Is this too complicated for my small business?”
The tax code is complex, yes, but you don’t have to figure it out alone. SMB CPA Group specializes in simplifying these rules for small business owners in California, so you can focus on what you do best.
“Are these strategies legal and sustainable?”
Absolutely — these are fully compliant strategies grounded in the new legislation. The key is to plan thoughtfully and document everything properly.
“How do I get started?”
Start by reviewing your current tax posture and business structure with a trusted CPA. We recommend early action, as many benefits require timely elections or purchases.
We’re not just another tax firm — we are your strategic partner in navigating California’s challenging tax landscape. We tailor our advice specifically for small businesses like yours, ensuring you never pay a penny more than necessary.
Schedule a no-obligation assessment today to discuss how OBBBA impacts your business and what steps to take next:
https://calendly.com/smbcpagroup
Explore our full range of services at:
www.smbcpagroup.com
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Levon Galstian
Published By:
Cruncher Accounting, PC