Key Tax Updates for Business Owners: What You Should Know

5 Minute Read

Managing a business means staying on top of your numbers, and that includes understanding how tax law changes can affect your bottom line. With new IRS updates rolling out in 2025, now is the time to review your strategy, make smart decisions, and lock in savings before the year ends.

Here are the most impactful tax law changes business owners need to know, and how to prepare.

1. Bonus Depreciation Is Here To Stay

The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently reinstates 100% bonus depreciation for qualified property acquired after January 19, 2025, reversing the previously scheduled phase-down to 40% and 20%. It also introduces a new, separate 100% expensing rule under Section 168(n) specifically for qualified production property, such as factories and manufacturing equipment.

2. Section 179 Deduction Limits Increased

Section 179 expensing now allows a maximum deduction of $4 million, up from the previous $2.5 million limit, with the phase-out threshold also beginning at $4 million. These expanded limits, indexed annually for inflation, let businesses fully expense more capital assets like equipment and vehicles in the year they’re placed in service. This change enhances cash flow and reduces the tax burden for small and mid-sized businesses making significant investments. In addition, 100 percent expensing is now allowed for certain types of qualified production property, such as manufacturing facilities, broadening the scope of eligible assets.

3. Charitable Contributions

Businesses, specifically C Corporations, must now donate at least 1 percent of taxable income before any contributions are deductible, with corporate deductions capped at 10 percent of taxable income. An above-the-line deduction of up to $1,000 for individuals and $2,000 for joint filers starts in 2026, expanding access to non-itemizers. For itemizers, contributions must exceed 0.5 percent of AGI to qualify, and high-income donors face a 35 percent cap on their benefit rate. Additionally, a temporary 100 percent tax credit (up to $5,000 or 10 percent of AGI) is available through 2029, but only for gifts to scholarship-granting nonprofits.

4. 1099-K Expansion for Third-Party Payments

Form 1099-K reporting is now required only when gross payments exceed $20,000 and there are more than 200 transactions in a calendar year. This reverts the threshold back to the pre-2021 standard and significantly reduces the number of forms issued to casual sellers and gig economy workers. The change applies to tax years beginning after 2025, giving platforms and taxpayers time to adjust. These updated thresholds aim to simplify reporting and reduce confusion for low-volume users of payment apps and online marketplaces.

5. Higher Thresholds for 1099-MISC and 1099-NEC

Beginning January 1, 2026, the threshold for issuing both Forms 1099‑NEC and 1099‑MISC increases from $600 to $2,000 of payments in a calendar year. This new $2,000 threshold will be indexed for inflation starting in 2027, easing the reporting burden for small businesses and contractors. Additionally, backup withholding requirements will align with this adjusted threshold, simplifying compliance. These changes significantly reduce paperwork and administrative costs for frequent low‑dollar transactions.

6. Qualified Business Income (QBI) Deduction Extended

The 20 percent Qualified Business Income (QBI) deduction is now permanent beyond 2025, providing long-term certainty for pass-through businesses. The income phase-in threshold has increased to $75,000 for single filers (and $150,000 for joint filers), up from $50,000/$100,000, and this range will be indexed for inflation. A new minimum deduction of $400 is guaranteed for taxpayers reporting at least $1,000 of active trade or business QBI, also adjusted annually. Finally, the deduction’s structure and eligibility rules, such as wage/property limitations and SSTB phaseouts, remain in place but now operate within the expanded threshold range.

Final Thoughts: Take Action Before Year-End

Tax law changes can open the door for new savings or lead to unexpected liabilities if ignored. Whether it’s strategic equipment purchases or updated reporting procedures, these updates present opportunities to reduce your tax burden — but timing is everything.

Want to make sure you’re making the most of these changes?
Schedule a consultation with a tax advisor who specializes in business tax planning, especially one familiar with your industry and entity type.