IRS Deductions: What’s Changing for 2025 Tax Returns

As businesses prepare for the 2025 tax year, understanding what deductions have changed, remained the same, or been phased out can help you make smarter financial decisions. Whether you're planning ahead or looking to reduce your taxable income, here’s what business owners need to know about IRS deductions for 2025.

What’s In: New & Expanded Deductions

✅ Increased Section 179 Deduction
The Section 179 deduction has been adjusted again, allowing businesses to deduct even more on qualifying equipment and property purchases made in 2025. If you're considering upgrading your office furniture, software, or machinery, this could provide significant tax savings.

✅ Higher Standard Mileage Rate
The IRS has increased the standard mileage rate for 2025, meaning if you use a personal vehicle for business, you can claim a larger deduction for your business-related miles. Keep track of your mileage to maximize this deduction.

✅ Qualified Business Income (QBI) Deduction Remains
The 20% deduction for pass-through businesses (LLCs, S-Corps, sole proprietors) is still available in 2025. While some phase-outs may apply for higher-income businesses, this deduction remains a key tax-saving tool for small business owners.

✅ Energy-Efficient Commercial Building Deduction Expands
If your business invests in energy-efficient building improvements, you may qualify for an expanded deduction in 2025. This includes upgrades to HVAC systems, insulation, and lighting.

What’s Out: Deductions & Credits That Have Expired or Been Reduced

❌ Further Reduction in Bonus Depreciation
The phase-out of 100% bonus depreciation continues in 2025. This year, businesses can only deduct 60% of eligible asset purchases upfront, with further reductions in the coming years.

❌ Business Meal Deductions Remain at 50%
Unlike previous years with temporary pandemic relief measures, business meals are still only 50% deductible in 2025. If your business entertains clients often, this is something to keep in mind.

❌ R&D Expenses Still Subject to Amortization
The requirement to amortize Research & Development (R&D) expenses over multiple years continues in 2025, limiting the ability to deduct these costs in full within the same tax year.

❌ Certain Pandemic-Era Tax Credits Have Ended
Tax credits and deductions introduced during the COVID-19 pandemic, such as the Employee Retention Credit (ERC), remain unavailable in 2025.

How to Maximize Your 2025 Tax Savings

With changes to deductions and credits, planning ahead is essential. Here’s how you can make the most of your tax situation:

• Review your spending – Consider making capital investments before year-end to take advantage of Section 179 deductions.

• Track mileage & expenses – Ensure you’re logging business travel and eligible deductions throughout the year.

• Consult a tax professional – Tax laws are evolving, and expert advice can help you reduce liability while staying compliant.

Plan Ahead – Book a Tax Strategy Session

Staying informed about tax deductions can help you keep more of your hard-earned revenue. If you have questions or need guidance on making the most of your 2025 tax return, reach out today.

📩 Contact us now to schedule your tax planning session!

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