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2025 Tax Law Changes Every Business Owner Should Know

2025 Tax Law Changes Every Business Owner Should Know

Major tax changes are here for 2025โ€”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. Hereโ€™s what you need to know:

โœ… 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.

Whatโ€™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)

๐Ÿ“Œ This helps small businesses claim a deduction even with modest income, and simplifies long-term tax planning.

๐Ÿญ 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)

๐Ÿ“Œ Improves cash flow and makes capital investments more tax-efficient.

โš™๏ธ 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)

๐Ÿ“Œ This gives businesses more flexibility to fully expense major purchases rather than depreciate them over time.

๐Ÿ“„ 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

๐Ÿ“Œ This reduces reporting burdens for small businesses and gig workers.

๐Ÿ“ˆ 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)

๐Ÿ“Œ More potential tax savings for growing businesses and investors.

๐Ÿงพ Energy & Clean Vehicle Credits Ending Early

Ending in 2025โ€“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

๐Ÿ“Œ Businesses should plan accordingly if relying on these incentives.

๐Ÿ‘จโ€๐ŸŽจ 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)

๐Ÿ“Œ Result: Fewer forms and reduced complexity for smaller transactions in the future.

๐Ÿ’ฌ What Should You Do Now?

These changes create opportunities for greater deductions, simplified compliance, and enhanced planningโ€”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

Need Help? Letโ€™s Talk.

Letโ€™s meet to discuss how these updates affect your business.
Weโ€™re here to help you make the most of these changes.

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