What Small Businesses Can Expect for Their 2025 Tax Obligations

Doing your small business taxes can be confusing. Unless you’re a CPA, there’s a good chance you haven’t kept up on the latest changes coming down from the IRS. Plus, there’s still a lot of information you have to keep track of throughout the year if you want to make the most of your business tax deductions.

This article will explain everything you need to know about small business taxes and business tax deductions in 2025. You’ll learn tax planning strategies and how to potentially lower your taxable income so you can be confident in your tax preparation this year.

Tax changes for 2025

State Overtime Rules and Increased Minimum Wages

Six states are increasing the threshold that is exempt from overtime pay. These states are Alaska, California, Colorado, Maine, New York and Washington.

In addition, 23 states and 65 cities or counties have new minimum wage rates that will go into effect in 2025.

For example, Alaska’s minimum wage increased from $11.73 to $11.91 as of January 1st, 2025. The minimum salary for employees who are exempt from overtime requirements also increased from $48,796.80 to $49,545.60.

California’s minimum wage increase to $16.50 on January 1st, 2025, and for exempt classification, employees must earn at least twice the state’s minimum wage, thus increasing minimum exempt salary to $68,640. For qualifying businesses in key industries, like fast food chains with at least sixty locations, the minimum wage increased to $20 an hour. Healthcare workers also saw a minimum wage increase ranging from $18 to $23 per hour.

Payment App Taxes

Historically, taxes on payments using apps like Cash App and Venmo weren’t required until a $20,000 and 200 transaction threshold was met, but the 2021 American Rescue Act (ARA) decreased that amount to $600 with no transaction minimum. To the relief of many small businesses, the ARA changes were delayed, but in 2025, businesses will have to pay taxes on transactions over $5,000 as part of a phased-in approach to implementing the regulation.

Beneficial Ownership Information Reporting

Under the Corporate Transparency Act (CTA), small businesses must report Beneficial Ownership Information (BOI)

The CTA is designed as an anti money laundering law that provides law enforcement officials in the U.S. an effective tool against transnational criminals.

To comply with CTA, existing businesses will need to report names, addresses, birthdates, and ID numbers for every beneficial owner by the end of 2025, while new businesses will have 30 days to report BOI after forming.

Potential Tax Changes 2025 May Bring

With a new president in office and both a senate and house controlled by Republicans, additional changes to tax laws may be put into effect in 2025. For example, much of the Tax Cuts and Jobs Act (TCJA) is set to expire this year. If it is not extended, it may have an impact on income tax rates, small business tax deductions, and other topics of interest to business owners wondering how to reduce taxes.

Areas that may be impacted by the TCJA include:

• Individual Tax Rates on Business Income: TCJA reduced rates for most taxpayers, including net taxable income from sole proprietorships, S corps and partnerships. Currently, the top individual tax rate is 37%, but without changes, when TCJA ends, the top individual tax rate will go back to 39.6%.
• Qualified Business Income (QBI) Deduction: The QBI business tax deduction lets qualified business owners deduct up to 20% of their business income. The result is a reduction in taxable income, without affecting adjusted gross income.
• First Year Bonus Depreciation: At its launch, TCJA encouraged business investment by allowing 100% depreciation for qualifying assets. The amount allowed for this business tax deduction has decreased every year since 2022, however, and will reach 0% by 2027.
• Section 179 Expensing: This aspect of TCJA offers business tax deductions in the form of immediate deductions for the cost of qualifying equipment. The Act currently limits the deduction at $1.25 million, but some have proposed doubling this amount, which would help small business owners purchase more equipment and be able to use those business expenses for taxes.
• Corporate Tax Rate: Under TCJA, the corporate tax rate is set at 21%, but some have pushed to lower the corporate tax rate even more for businesses manufacturing in the United States.

Tax tips for new business owners

If you started your business last year, you might not know how to file a business tax return or how to make the most of your business tax deductions. Here are key things you need to know.

• You will need your tax ID number to file a tax return. This is your employer identification number if your business is a corporation or limited liability company or your Social Security number. In a few cases, other numbers can be used for filing.
• On top of income taxes, you will owe 15.3 percent of your net self-employment income for self-employment tax. This covers what an employer would typically deduct from your paycheck to pay Medicare taxes (2.9%) and Social Security taxes (12.4%).
• All income, including cash payments, must be reported on your return.
• If you pay health insurance premiums for yourself, you may be able to get a business tax deduction from them.
• If you can’t complete your taxes by April 15th, this year’s tax deadline, you can file for an extension. If you do this, make it a point to pay your estimated taxes to avoid penalties and interest on the amount you owe.
• Bonuses paid to employees are taxed differently from regular employee wages. They come with a bonus tax rate of 22 percent.
• If you have a regular job and run a side business to earn extra income, the business income is considered by the IRS to be self-employment income and is taxed accordingly.

2025 tax filing and other deadlines

2024 federal tax returns and payments are due by midnight on April 15, 2025, for sole proprietorships, independent contractors, household employers, and C corporations. For S corporations and partnerships, taxes were due on March 17, 2025.

Quarterly tax due dates for 2025 for estimated income tax are:

• Quarter one: April 15
• Quarter two: June 16
• Quarter three: September 15
• Quarter four: January 15, 2023.

FAQs About What Small Businesses Can Expect for Their Tax Obligations in 2025

What can you claim on taxes?

Potential business tax deductions include vehicle expenses, business loan interest, a home office, business insurance, office supplies, business travel expenses, and more.

How can I reduce business taxes?

You can potentially reduce business taxes by deducting eligible expenses. A tax professional would be able to assist you with this.

Do I have to file business taxes or just personal taxes?

If you are a business owner, or even if you are a self-employed sole proprietor, you will have to file additional forms on top of your personal income tax. Self-employed individuals will likely have to file forms including a Schedule C, while S-Corps, for example, file an 1120-S. Your tax professional will be able to provide you a complete answer.

How do I calculate a home office deduction?

You’ll need to know the square footage of your house, and how many square feet your office is, as well as the cost of your mortgage or rent and relevant utilities for the full tax year. Most tax software or tax professionals will be able to provide an accurate estimate based on these numbers.

Can meals be a business tax deduction?

You can deduct 50% of the cost of business meals, including tax and tip. Note that the meal must have business purposes—you can’t just put your daily lunch on your company credit card and get a business tax deduction.

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