Business Tax Limits Increase for 2025
Posted by Michē Needham on February 03, 2025
Each year, various tax-related limits that impact businesses are adjusted based on inflation. For 2025, many of these limits have increased, although the rate of increase has slowed compared to recent years due to cooling inflation. Here are some key figures that may affect you and your business:
2025 Deductions Compared to 2024
- Section 179 Expensing:
- Limit: $1.25 million (up from $1.22 million)
- Phaseout: $3.13 million (up from $3.05 million)
- Sec. 179 expensing limit for certain heavy vehicles: $31,300 (up from $30,500)
- Standard Mileage Rate for Business Driving: 70 cents per mile (up from 67 cents)
- Income-Based Phaseouts for Sec. 199A Qualified Business Income Deduction Begin at:
- Married filing jointly: $394,600 (up from $383,900)
- Other filers: $197,300 (up from $191,950)
Retirement Plans in 2025 vs. 2024
- Employee Contributions to 401(k) Plans: $23,500 (up from $23,000)
- Catch-Up Contributions to 401(k) Plans: $7,500 (unchanged)
- Catch-Up Contributions to 401(k) Plans for Ages 60-63: $11,250 (new for 2025)
- Employee Contributions to SIMPLEs: $16,500 (up from $16,000)
- Catch-Up Contributions to SIMPLEs: $3,500 (unchanged)
- Catch-Up Contributions to SIMPLE Plans for Ages 60-63: $5,250 (new for 2025)
- Combined Employer/Employee Contributions to Defined Contribution Plans (excluding catch-ups): $70,000 (up from $69,000)
- Maximum Compensation Used to Determine Contributions: $350,000 (up from $345,000)
- Annual Benefit for Defined Benefit Plans: $280,000 (up from $275,000)
- Compensation Defining a Highly Compensated Employee: $160,000 (up from $155,000)
- Compensation Defining a “Key” Employee: $230,000 (up from $220,000)
Social Security Tax
- Cap on Amount of Employees’ Earnings Subject to Social Security Tax for 2025: $176,100 (up from $168,600 in 2024)
Other Employee Benefits This Year vs. Last Year
- Qualified Transportation Fringe-Benefits Employee Income Exclusion: $325 per month (up from $315)
- Health Savings Account Contribution Limit:
- Individual coverage: $4,300 (up from $4,150)
- Family coverage: $8,550 (up from $8,300)
- Catch-up contribution: $1,000 (unchanged)
- Flexible Spending Account Contributions:
- Health care: $3,300 (up from $3,200)
- Health care FSA rollover limit (if plan permits): $660 (up from $640)
- Dependent care: $5,000 (unchanged)
Potential Upcoming Tax Changes
These are just some of the tax limits and deductions that may affect your business, and additional rules may apply. With President Trump back in the White House and the Republicans controlling Congress, several tax policy changes have been proposed and could potentially be enacted in 2025. For example, Trump has proposed lowering the corporate tax rate (currently 21%) and eliminating taxes on overtime pay, tips, and Social Security benefits. These and other potential changes could have wide-ranging impacts on businesses and individuals. It’s important to stay informed. Consult with us if you have questions about your situation.
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Michē has more than 21 years of experience providing tax and advisory services to commercial businesses and individuals. She has extensive experience with pass-through taxation of partnerships and S corporations and individual taxation, specializing in the areas of real estate, energy, and professional services. Additionally, Michē is responsible for providing services such as business tax planning, individual tax planning, personal wealth, and succession planning.