Stay Ahead of the Curve: Tax and Business Updates You Can't Afford to Miss

As 2025 gets underway, small and mid-sized business owners need to stay informed about key tax and business updates that could significantly impact their financial strategies.

With expiring tax provisions, regulatory shifts, and economic uncertainties, now is the time to plan proactively. Here’s a breakdown of what’s changing, what to watch for, and how to prepare.

Tax Updates on the Horizon

The landscape of tax policies is shifting, and business owners must stay ahead of the curve. Several key provisions are set to expire, while new legislation could introduce fresh opportunities and challenges. Understanding these changes will help businesses plan effectively and mitigate potential financial risks.

Expiring Tax Provisions for Individuals

One of the biggest changes looming is the expiration of several provisions under the 2017 Tax Cuts and Jobs Act (TCJA). Many of these tax cuts, particularly for individuals, are set to expire at the end of 2025. Key provisions to watch include:

• Marginal Tax Rates: The top rate, currently 37%, may revert to 39.6%. However, indications suggest these rates might be extended rather than increased.
• Standard Deduction: The higher standard deduction, which nearly doubled under TCJA, may also be extended or made permanent.
• Child Tax Credit: The current $2,000 credit could drop back to $1,000 unless Congress takes action. There is bipartisan support for an extension or increase.
• State and Local Tax (SALT) Deduction: The $10,000 cap on SALT deductions has been a point of contention, with efforts to increase or remove the cap altogether.
• Alternative Minimum Tax (AMT) and Mortgage Interest Deduction: These provisions may be modified, with the mortgage interest cap possibly being reduced further.

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Expiring Tax Provisions for Businesses

Business owners should also be aware of changes affecting their tax obligations:

• Qualified Business Income (QBI) Deduction: The 20% deduction for pass-through entities (S-corps, LLCs) expires at the end of 2025, though there is strong support for an extension.
• Bonus Depreciation: Previously at 100%, bonus depreciation has been phasing out and will drop to 40% in 2024. While there have been proposals to restore 100% deductibility, the fate of this provision remains uncertain at this point.
• Research and Development (R&D) Expensing: Business owners may see a return to full expensing rather than the current five-year amortization requirement.

Potential New Provisions for Individuals

Some additional proposals include eliminating income taxes on tips, overtime pay, and even revisiting an auto loan interest deduction, which hasn’t been available since 1986. While these ideas have been floated, their likelihood of passing remains unclear.

Potential New Provisions for Businesses

Several new provisions being discussed could significantly impact business taxation. One proposal suggests lowering the corporate tax rate from the current 21% to 15%, with special consideration for manufacturing businesses. If implemented, this could prompt businesses to reevaluate their structure and consider shifting from pass-through entities to C corporations.

Another provision being considered is restoring the full deductibility of research and development (R&D) expenses, reversing the recent five-year amortization requirement. Additionally, the government is looking into increasing the deduction limits for interest expenses, which would particularly benefit highly leveraged companies.

While these provisions remain speculative, business owners should stay informed and prepared for potential changes.

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Tax Raises

While tax cuts are being discussed, potential tax increases are also on the table. Some deductions and credits could be reduced or eliminated to offset revenue losses. The deductions for student loan interest and tax credits for green energy investments—such as electric vehicles and energy-efficient home improvements—could face cuts.

Additionally, subsidies for higher education, including the Lifetime Learning Credit and American Opportunity Credit, may be reevaluated or scaled back. If implemented, these changes could have widespread implications for both individuals and businesses, requiring a strategic reassessment of financial and tax planning approaches.

Executive Orders Affecting Income Taxes

Several executive orders have been issued that could impact tax regulations and enforcement. One key order focuses on government efficiency and regulatory reduction, potentially rolling back certain tax-related compliance requirements. The Department of Government Efficiency (DOGE), a newly created body, is reviewing regulations to streamline processes and remove outdated or burdensome rules, which may directly affect how tax laws are administered.

Another major executive order includes a federal hiring freeze, impacting the IRS’s ability to hire additional agents as initially planned under a prior administration’s expansion initiative. This could slow tax enforcement efforts and audits, at least temporarily. Additionally, a temporary regulation freeze could delay or halt new IRS rules that interpret tax laws, adding uncertainty to future tax planning.

Business owners should closely monitor these developments to understand how executive actions may influence their tax obligations and compliance requirements.

Estate Planning and the TCJA Sunset

For those considering estate planning, 2025 is a pivotal year. The lifetime exemption for gift and estate taxes, currently at $13.99 million, will be cut in half unless Congress acts. High-net-worth individuals should be considering strategies now, such as:

• Using Exemptions Before They Decrease: If the exemption amount is lowered, assets transferred before the sunset may avoid higher future taxes.
• Utilizing Grantor Trusts: These can provide long-term tax benefits by keeping assets out of an estate while still maintaining control.
• Estate Planning Flexibility: Disclaimer provisions and swapping mechanisms can help adapt plans if tax laws change unexpectedly.

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Business Climate Shifts: Key Regulations to Watch

Beyond tax policies, evolving regulations are shaping the business environment in significant ways. From transparency requirements to international trade policies and workforce compliance, these regulatory changes can affect operations, costs, and strategic planning. Business owners must stay informed to navigate these shifts effectively.

Corporate Transparency Act (CTA) and Beneficial Ownership Reporting

Businesses with fewer than 20 employees or less than $5 million in sales must comply with new reporting requirements, which demand disclosure of beneficial ownership. While legal challenges have delayed enforcement, businesses should stay prepared for compliance.

Tariffs and Trade Policy

New tariffs on imports from Mexico, Canada, and China could affect supply chains. Business owners should evaluate alternative suppliers, assess inventory strategies, and prepare for potential cost increases.

Immigration and Employment Verification

Immigration policies, including stricter enforcement and potential nationwide E-Verify requirements, may impact hiring practices. Employers should monitor policy changes and be prepared for possible compliance requirements.

Navigating Financial and Business Uncertainty

In an unpredictable economic climate, business owners must take proactive steps to ensure financial stability:

• Evaluate Risks: Factors like tariffs, regulatory shifts, and economic cycles can impact operations. Consider contingency plans for potential disruptions.
• Diversify Suppliers and Customer Base: Ensuring multiple sourcing options and broadening your customer reach can reduce financial risk.
• Build a Cash Reserve: Aim for six months of operating expenses in reserve to weather unforeseen downturns.
• Embrace Technology and AI: Leveraging data analytics and AI tools like Power BI and Microsoft Copilot can streamline decision-making and improve efficiency.
• Budget and Forecasting: Businesses should maintain a dynamic financial model with multiple scenarios (best case, worst case, and contingency plans) to remain agile.

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As 2025 unfolds, staying agile and proactive is key. By staying ahead of legislative and economic changes, businesses can position themselves for long-term success in an evolving landscape.