Each year, tax-related limits affecting businesses are adjusted for inflation. While many have increased for 2025, the rate of increase has slowed due to cooling inflation. Below are some key changes that may impact your business. 
2025 vs. 2024: Key Deduction Adjustments
Section 179 Expensing:
- Deduction limit: $1.25 million (up from $1.22 million)
- Phaseout threshold: $3.13 million (up from $3.05 million)
- 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)
Qualified Business Income Deduction (Sec. 199A) Phaseouts Begin At:
- Married filing jointly: $394,600 (up from $383,900)
- Other filers: $197,300 (up from $191,950)
Retirement Plan Contribution Limits for 2025
401(k) Plans:
- Employee contributions: $23,500 (up from $23,000)
- Catch-up contributions: $7,500 (unchanged)
- New catch-up for ages 60-63: $11,250 (new for 2025)
SIMPLE Retirement Plans:
- Employee contributions: $16,500 (up from $16,000)
- Catch-up contributions: $3,500 (unchanged)
- New catch-up for ages 60-63: $5,250 (new for 2025)
Other Retirement Plan Limits:
- Combined employer/employee defined contribution plan limit: $70,000 (up from $69,000)
- Maximum compensation for contributions: $350,000 (up from $345,000)
- Annual defined benefit plan limit: $280,000 (up from $275,000)
- Highly compensated employee threshold: $160,000 (up from $155,000)
- “Key” employee compensation limit: $230,000 (up from $220,000)
Social Security Tax Cap for 2025
- Maximum taxable earnings: $176,100 (up from $168,600)
Changes to Employee Benefit Limits
Qualified Transportation Fringe Benefits:
- Monthly income exclusion: $325 (up from $315)
Health Savings Accounts (HSA) Contribution Limits:
- 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 (FSA) Contribution Limits:
- Health care FSA: $3,300 (up from $3,200)
- Health care FSA rollover (if allowed): $660 (up from $640)
- Dependent care FSA: $5,000 (unchanged)
Potential Tax Policy Changes in 2025
Beyond these annual adjustments, significant tax policy changes could be on the horizon. As a result, with President Trump returning to office and Republicans in control of Congress, several proposals are under discussion, including:
- A potential reduction in the corporate tax rate (currently 21%)
- The elimination of taxes on overtime pay, tips, and Social Security benefits
These potential changes could have substantial implications for businesses and individuals. Staying informed and planning accordingly is crucial. If you have questions about how these updates impact your business, feel free to reach out.
