2025 Tax Law Changes Every Business Owner Should Know

Major tax changes are here for 2025—and they could significantly impact your business strategy, expenses, and reporting requirements. The latest federal tax law introduces permanent deductions, larger write-offs, and streamlined compliance. Here’s what you need to know:

✅ QBI Deduction Made Permanent

What changed:

The 20% qualified business income (QBI) deduction is now permanent for sole proprietors, partnerships, S corporations, and certain trusts/estates.

What’s new in 2026 and beyond:

1. A new minimum $400 deduction applies if you have at least $1,000 in active QBI
2. Wage/property limitation thresholds increase to $75,000 (single) or $150,000 (joint)

📌 This helps small businesses claim a deduction even with modest income, and simplifies long-term tax planning.

🏭 100% Bonus Depreciation Made Permanent

Businesses can now permanently deduct 100% of the cost of qualified business property placed in service after Jan. 19, 2025. This includes:

1. Equipment
2. Machinery
3. Certain real property used in qualified production (e.g., manufacturing, refining)

📌 Improves cash flow and makes capital investments more tax-efficient.

⚙️ Expanded Section 179 Expensing

The new limits for Section 179 expensing are:

1. Deduction cap: $2.5 million
2. Phase-out begins at $4 million(Both indexed for inflation)

📌 This gives businesses more flexibility to fully expense major purchases rather than depreciate them over time.

📄 1099 Filing Thresholds Updated

Effective 2025:

1. 1099-K threshold returns to $20,000 and 200 transactions
2. 1099-NEC and 1099-MISC thresholds increase to $2,000, indexed for inflation

📌 This reduces reporting burdens for small businesses and gig workers.

📈 Improved Small Business Stock (QSBS) Exclusion

Investors and founders get:

1. 50% exclusion on gains held 3 years
2. 75% at 4 years
3. 100% at 5 years
4. Per-issuer gain limit increases from $10M to $15M
5. Asset test rises to $75M (from $50M)

📌 More potential tax savings for growing businesses and investors.

🧾 Energy & Clean Vehicle Credits Ending Early

Ending in 2025–2026:

1. Clean vehicle credits (new and used)
2. Energy-efficient home improvement credit
3. Residential clean energy credit
4. Commercial clean vehicle & fuel refueling credits

📌 Businesses should plan accordingly if relying on these incentives.

👨‍🎨 Example: How This Affects a Small Business Owner

Ed is a self-employed artist selling on Etsy and receives:

1. $1,500 from PayPal/Venmo (under 1099-K threshold)
2. $2,500 via check from a local business (1099-NEC required)
3. $1,800 via direct deposit (1099-NEC may no longer apply starting in 2026 due to new $2,000 threshold)

📌 Result: Fewer forms and reduced complexity for smaller transactions in the future.

💬 What Should You Do Now?

These changes create opportunities for greater deductions, simplified compliance, and enhanced planning—but they also bring early terminations for energy credits and new tracking rules.

We recommend reviewing:

1. Equipment and property purchases
2. Compensation plans
3. 1099 filing systems
4. Capital investment strategies