The new year and new administration bring new updates and revisions to business tax laws. Staying on top of these tax changes can be challenging due to the volume of new information introduced. However, there's no need to feel overwhelmed. At Huddle Business Capital, we did the homework for you. We took the initiative to sift through the latest business tax developments and highlight some important updates.
Stay ahead of the curve by understanding these business tax changes for 2025 that could impact your business's financial health, strategy, and investment plans. Please note that the following information is subject to change by the Internal Revenue Service (IRS) at any time, so it is essential to consult an accountant if you have questions or need assistance.
Certain pass-through business income—the earnings "passed through" to the company's owner(s) to report on their individual tax returns—is eligible for a 20% deduction in 2025. After 2025, this tax measure is scheduled to expire, per information in the Tax Cuts and Jobs Act of 2017 (TCJA). Pass-through legal structures include sole proprietorships, limited liability companies (LLCs), S corporations, and partnerships.
Many businesses use the cash method of accounting because it is easier and less involved than accrual accounting. The cash method is straightforward: revenue is recorded when payment is received, and expenses are logged when payments are made. In 2025, C corporations can use the cash method if they have gross revenues of $31 million or less over the previous three years. Partnerships and LLCs that C corporations own can also use the cash method.
In 2025, the Section 179 tax deduction limit is $1,250,000 (up from $1,220,000 in 2024), and the phase-out threshold is $3,130,000 (up from $3,050,000 in 2024). Section 179 lets business owners write off the cost of qualifying equipment, machinery, vehicles, or technology right away instead of being depreciated over time. Although these adjustments for 2025 are relatively modest, they still present advantages for businesses.
In 2025, bonus depreciation is set at 40%. This means businesses can write off 40% of the purchase price of qualifying business property (equipment, machinery, vehicles, technology) acquired and put into business use this year. Then, the remaining cost is deducted over several years until it phases out. Bonus depreciation is set to decrease to 20% in 2026, making 2025 an advantageous year to utilize it.
Here's news if your company uses a car, van, pickup, or specialty truck (e.g., panel truck) for business purposes. In 2025, the standard mileage rate is 70 cents, up from 67 cents in 2024. This adjustment reflects changes in vehicle operating costs and can impact how you calculate expenses for business-related travel. The other categories of mileage rates remain unchanged from 2024—the mileage allowance for medical and military purposes is 21 cents per mile, and the allowance for charitable organizations is 14 cents per mile.
If your business is located in Louisiana, Nebraska, North Carolina, or Pennsylvania, you will be glad to know that your state corporate tax rates will be lower in 2025. The corporate tax rate in Louisiana is 5.5%, Nebraska is 5.2%, North Carolina is 2.25%, and Pennsylvania is 7.99%.1 Conversely, New Jersey and New Mexico are the two states that increased their corporate tax rates to 9% and 5.9%, respectively. The average corporate tax rate in 2025 is 6.5% among states that impose a corporate tax.
If you're contemplating relocating your business to a new location in 2025, you may be able to recover some or even all of the associated costs. Corporations and LLCs can deduct the complete expense of the move (e.g., transport trucks, professional movers) from company taxes. Sole proprietorships and partnerships can deduct the relocation expenses if they move to a new location 50 miles away (or more) and the owners work in the new location for 39 weeks (or more) in the first year after the move.2 Consult an accountant to determine if deducting relocation expenses will apply to your business.
1. https://taxfoundation.org/data/all/state/state-corporate-income-tax-rates-brackets/
2. https://www.insureon.com/blog/small-business-tax-deductions
This Huddle Business Capital blog article is purely educational and contains general information and opinions; it is not intended to provide advice or recommendations of any kind. Huddle Business Capital is not affiliated with nor endorses the Internal Revenue Service (IRS), The Tax Foundation, or Insureon.