Small Business Tax Filings for 2025
Small Business Tax Filings for 2025 (To be Filed in 2026): Key Changes Compared to 2024
Introduction
Tax compliance is more than just filing forms—it’s about understanding the evolving landscape of federal and state regulations, leveraging opportunities, and avoiding costly mistakes. For tax year 2025 (returns filed in 2026), small businesses face a mix of inflation-driven updates, revived incentives, and phased-out credits. Compared to 2024, these changes are more substantial, requiring proactive planning and strategic decision-making.
This guide provides a comprehensive breakdown of the 2025 tax year, highlighting differences from 2024, explaining their impact on small businesses, and offering actionable strategies to stay compliant while maximizing efficiency.
Inflation Adjustments: Brackets and Deductions
What Changed in 2025
The IRS adjusts tax brackets and deductions annually to account for inflation. For 2025:
Tax brackets increased by about 2.8% compared to 2024.
Standard deduction for joint filers rose to $30,000, up from $29,200 in 2024.
Head of household deduction increased to $22,000, compared to $21,600 in 2024.
Why It Matters
These adjustments prevent “bracket creep,” ensuring businesses and pass-through owners aren’t penalized simply due to inflation. For small businesses structured as LLCs, partnerships, or S-corps, these changes directly affect owners’ taxable income.
Actionable Steps
Review payroll systems to ensure withholding aligns with new brackets.
Update financial projections to reflect higher deductions.
Consider timing income recognition to optimize bracket positioning.
Bonus Depreciation: 100% Deduction Restored
The Big Change
One of the most impactful updates for 2025 is the return of 100% bonus depreciation.
Businesses can deduct the full cost of qualified property in the year of purchase.
This provision had been phasing out since 2023 but is now permanent.
Why It Matters
For small businesses, this means immediate tax relief on equipment, machinery, and technology investments. Instead of spreading deductions over several years, businesses can reduce taxable income right away.
Practical Example
A manufacturing firm purchasing $500,000 in equipment can deduct the entire amount in 2025, lowering taxable income significantly compared to 2024, when only 80% was deductible.
Actionable Steps
Plan capital expenditures strategically in 2025 to maximize deductions.
Consider upgrading outdated technology or machinery.
Work with advisors to balance depreciation strategies with long-term growth.
R&D Expensing Adjustments
What Changed
Research and development (R&D) expenses saw modifications in 2025:
Businesses can expense more R&D costs upfront, reducing taxable income.
Compared to 2024, where amortization rules limited deductions, 2025 rules are more favorable.
Why It Matters
Small businesses in technology, manufacturing, and innovation sectors benefit most. This adjustment rewards innovation and positions small businesses to compete more effectively.
Actionable Steps
Document all R&D activities thoroughly to substantiate deductions.
Explore whether software development qualifies under R&D rules.
Consider partnerships or grants that align with tax incentives.
Clean Energy Incentives: Phaseouts
What Changed
Clean energy credits are shifting in 2025:
Wind and solar credits begin phasing out for projects not started by July 4, 2026.
Commercial energy incentives like Section 179D will phase out in 2026.
Geothermal incentives remain intact.
Why It Matters
For small businesses, this means less reliance on clean energy credits in tax planning compared to 2024. Long-term investment strategies should account for these phaseouts.
Actionable Steps
If considering solar or wind projects, start before mid-2026 to lock in credits.
Explore geothermal options, which remain incentivized.
Reassess sustainability strategies with reduced tax support.
International and State-Level Changes
Federal Updates
Global intangible low-taxed income (GILTI) renamed Net-CFC Tested Income (NCTI), with effective tax rates around 12–13%.
State-Level Updates
Adjustments to state and local tax (SALT) deductions may affect businesses in high-tax states like New Jersey.
Some states are aligning with federal bonus depreciation rules, while others are not.
Actionable Steps
For businesses with international exposure, review NCTI implications.
Monitor state-level conformity with federal rules.
Adjust SALT deduction strategies for high-tax jurisdictions.
Compliance Updates: 1099-K and Reporting Thresholds
What Changed
For 2024, the IRS lowered the 1099-K reporting threshold to $5,000. This continues into 2025.
Why It Matters
Businesses using platforms like PayPal, Venmo, or Square must report more transactions. This increases compliance burdens and requires stronger recordkeeping.
Actionable Steps
Implement reconciliation processes for third-party payment platforms.
Train staff on identifying reportable transactions.
Use accounting software that integrates with payment processors.
Strategic Planning for 2025 Filings
Key Strategies
Leverage 100% bonus depreciation for capital purchases.
Review R&D activities for expensing opportunities.
Prepare for reduced clean energy credits in long-term planning.
Update payroll and bookkeeping systems to reflect new thresholds.
Engage in proactive tax planning with advisors to align with both federal and state changes.
Deep-Dive Subtopics
How Bonus Depreciation Works in Practice
Bonus depreciation allows businesses to deduct the full cost of qualifying property in the year it’s placed in service. Qualifying property includes machinery, equipment, computers, and certain vehicles.
State-Level SALT Deduction Strategies
Businesses in high-tax states like New Jersey and California should explore entity-level tax elections to bypass federal SALT caps.
Step-by-Step 1099-K Compliance Checklist
Identify all platforms used for payments.
Track gross receipts monthly.
Reconcile platform reports with internal records.
File accurate 1099-K forms by January 31, 2026.
Why These Changes Matter
Compared to 2024, tax year 2025 introduces more significant shifts:
Greater opportunities for immediate deductions through bonus depreciation.
Expanded R&D expensing to reward innovation.
Reduced reliance on clean energy credits, requiring new planning approaches.
Lower reporting thresholds that demand stronger compliance systems.
Small businesses that adapt quickly will not only remain compliant but also position themselves for growth.
Conclusion
Tax year 2025 brings both opportunities and challenges for small businesses. With bonus depreciation restored, R&D expensing expanded, and clean energy incentives phasing out, the landscape looks very different from 2024.
FMQ Consulting is here to guide small businesses through these complexities, ensuring compliance and maximizing tax efficiency. By staying informed and proactive, businesses can turn tax changes into strategic advantages.
