Tax Changes for Small Businesses in 2025: What You Need to Know

Explore how impending tax changes and TCJA expirations will reshape small business tax strategies in 2025—learn to adapt and thrive!

As President Trump gears up for his second term, small business owners, it’s time to fasten your seatbelt. A wave of opportunity is brewing, and it’s poised to reshape the way you run your business in the next few years.

I remember when the Tax Cuts and Jobs Act (TCJA) of 2017 was signed into law. It felt like a welcome change for small businesses—tax cuts, more room to grow, and a bit more certainty for the future.

But now, with 2025 looming, the winds are shifting. Many of those changes are about to expire, and with it comes more uncertainty.

Key Tax Changes for Small Business

Corporate Tax Rate – Flat and Steady for Now

When the TCJA dropped the corporate tax rate to a flat 21% from a high of 35%, it was a lifeline for many businesses. This change is permanent, meaning your tax rate will stay steady—unless lawmakers decide to revisit it. If you’re breathing a sigh of relief, it’s because this was one of the few provisions that’s locked in. No surprises here… for now.

Pass-Through Deductions & TCJA Expiration – Set to Expire, But Could Be Extended

Now, let’s talk about something that could hit a little closer to home: pass-through deductions. If you run an S-Corp, partnership, or even a sole proprietorship, you’ve probably enjoyed that 20% deduction on qualified business income (QBI). It’s been a game-changer for many small businesses, but here’s the kicker—it’s set to expire at the end of 2025. Will Congress extend it? Hard to say. There’s bipartisan support for it, but nothing is guaranteed. The uncertainty is real, and if this goes away, it could sting your bottom line. Imagine the difference it would make on small businesses tax deduction if it disappears—20% less to deduct.

SALT Cap Adjustments – More Potential Deductions

The TCJA capped the SALT (State and Local Taxes) deduction at $10,000. It’s a limit on what you can deduct for property taxes and state/local income or sales taxes. Trump has proposed raising this cap—maybe to $20,000 or even doubling it for married couples. Think about what that could mean for your small business tax filing: more deductions in your pocket if the policy changes.

Social Security Benefits – Potential Tax Relief for Retirees

If you’ve got employees who are eyeing retirement, there’s a proposal that could ease their burden. Trump’s plan to eliminate taxes on Social Security benefits for lower-income retirees could change the way your workers plan their futures.

Overtime Pay and Tip Income – A Possible Shift

Now, let’s talk labor. Trump’s also proposing eliminating taxes on overtime pay and tip income. This might sound like a win for some workers, but there’s a flip side. Overtime jobs might become more appealing than salaried positions, especially in industries like hospitality. This could shift the workforce dynamics in your business, impacting labor costs.

Tariffs and the New External Revenue Service – Rising Import Costs

Here’s where the rubber hits the road for those who import goods: President Trump is proposing the creation of an External Revenue Service (ERS) to collect tariffs on foreign goods. He’s also indicated he could impose tariffs as high as 20% on imports—and up to 60% on goods from China. If your business relies on imported materials, this could send your costs soaring, affecting your profit margins. Now’s the time to start planning—look at your suppliers, consider adjusting prices, and prepare for the changes.

Preparing for Change

Here’s the thing: change is coming, and small business owners need to be ready. With key provisions from the TCJA about to expire and new proposals on the horizon, you’re going to have to rethink how you manage taxes. It’s not just about keeping track of the news—it’s about staying ahead of the game.

Talk to your accountant.

Revisit your strategies.

Make sure you’re prepared for whatever the future holds.

Because the tax landscape is shifting, and it’s time to make sure your business is ready for whatever comes next. In the meantime, and above all, stay proactive. The decisions you make now could make all the difference for the future of your small business.

Stay ahead of shifting tax laws—contact a Houston CPA today to refine your tax strategy and safeguard your business in 2025!