Insights

As we approach 2025, business owners face a shifting tax landscape that could have significant impacts on how they manage their finances. From potential changes in tax rates to new credits, deductions, and compliance requirements, staying on top of these updates is critical to minimizing your tax burden and maximizing your business’s growth opportunities. Whether you're a small business owner, entrepreneur, or CEO of a larger corporation, it’s essential to understand the upcoming tax changes to ensure you’re prepared for the year ahead.

Here’s a breakdown of key tax updates for 2025 that every business owner should know about.

1. Potential Corporate Tax Rate Increases

There have been ongoing discussions about raising the corporate tax rate in the U.S. After the Tax Cuts and Jobs Act (TCJA) reduced the corporate tax rate to 21%, there has been increasing political pressure to raise the rate, especially for large corporations. While nothing has been finalized yet, business owners should prepare for the possibility of higher rates in 2025, particularly if lawmakers push forward with tax reform initiatives.

What You Need to Do: Stay updated on any changes to the corporate tax rate and adjust your financial strategy accordingly. Consider working with a tax advisor to assess your business's potential exposure if rates do increase and explore ways to offset the potential tax hike, such as accelerating deductions or reviewing business structure options.

2. Expansion of Paid Family and Medical Leave Tax Credits

In 2025, businesses may see an expansion of paid family and medical leave programs. Several states have already implemented their own paid leave programs, and there is ongoing discussion about creating national incentives for businesses that offer paid leave. This could include expanded tax credits for employers who provide family leave benefits to employees.

What You Need to Do: If your business offers paid leave benefits or is considering implementing a paid leave program, stay informed about potential changes to federal tax credits. This may allow you to offset some of the costs associated with offering this benefit to employees.

3. Increased Focus on Digital Sales Taxation

The rise of e-commerce and digital business models has prompted more states and countries to focus on taxing digital sales. In 2025, expect additional scrutiny on digital goods and services, with more states implementing or expanding sales tax on e-commerce transactions. This includes everything from streaming services to digital subscriptions and online goods.

What You Need to Do: If you run an e-commerce business or offer digital services, be prepared to comply with sales tax requirements across multiple jurisdictions. Consider using sales tax automation software to help keep track of varying state and local tax rules and ensure timely and accurate tax collection.

4. Changes to Research & Development (R&D) Tax Credits

The Research & Development (R&D) tax credit has been an essential tool for businesses in innovation-driven sectors. As of 2025, lawmakers are expected to revisit the scope and structure of R&D tax credits, potentially making them more accessible or generous. Some proposals have included expanding credits for smaller businesses or those in underserved sectors.

What You Need to Do: If your business invests in innovation or technology, make sure you’re taking full advantage of the R&D tax credit. Work with a tax professional to ensure that your research activities are properly documented and qualify for the credit. Watch for any changes that could make it easier to claim or increase your available credits.

5. Global Minimum Tax Rate for Multinational Corporations

The Organization for Economic Cooperation and Development (OECD) has pushed for a global minimum tax rate to prevent tax avoidance by multinational corporations. This could come into effect as early as 2025, which means U.S.-based multinational corporations may face increased global tax obligations if they operate in countries with lower tax rates than the agreed minimum.

What You Need to Do: If your business has international operations, review your global tax strategy to ensure compliance with the new global minimum tax rate. Seek advice from a tax professional specializing in international tax law to minimize your exposure to higher taxes and penalties.

6. Possible Changes to Capital Gains Tax Rates

There has been ongoing discussion around increasing capital gains tax rates, particularly for high-income individuals and businesses. As of 2025, business owners should be prepared for possible changes in the tax treatment of capital gains, which could impact the taxation of investments, business sales, or other capital assets.

What You Need to Do: If you're planning to sell your business or liquidate certain assets in the near future, now is the time to plan ahead. Work with your tax advisor to understand how potential changes in capital gains tax rates could impact your sale or investment decisions, and consider strategies like tax-deferred exchanges or timing asset sales for the most favorable tax treatment.

7. Increased IRS Enforcement and Audits

The IRS has been ramping up enforcement efforts in recent years, and this trend is expected to continue in 2025, especially with increased funding from the Inflation Reduction Act. The IRS plans to focus on audits of higher-income earners, businesses with complex structures, and industries with historically underreported income.

What You Need to Do: Ensure your business's tax filings are accurate, complete, and well-documented. Work with a tax advisor to review your financial statements and tax returns to identify any areas that may draw IRS scrutiny. A proactive audit defense strategy can help protect your business in the event of an audit.

8. Enhanced Cybersecurity Tax Incentives

As cybersecurity becomes a growing concern for businesses, there are expected tax incentives to encourage investment in stronger cybersecurity measures. In 2025, businesses that invest in enhancing their cybersecurity infrastructure may benefit from increased tax deductions or credits aimed at improving digital security.

What You Need to Do: If your business hasn’t already invested in cybersecurity, consider doing so in 2025. Not only will these investments protect your business from data breaches and cyber-attacks, but you may also be able to benefit from tax incentives designed to offset the cost of these upgrades.

9. Changes to State-Level Taxation of Remote Work

With remote work becoming more permanent for many businesses, tax laws are evolving to address how remote employees are taxed at the state level. In 2025, more states may implement new regulations regarding how to handle income tax for workers who live and work in different states from their employers.

What You Need to Do: Review your remote work policies to ensure you’re complying with state tax regulations for employees working across state lines. Depending on where your employees live and work, you may need to withhold and remit taxes for multiple states.

10. Possible Increase in Estate and Gift Tax Exemptions

There has been ongoing speculation about the future of estate and gift tax exemptions, which are set to decrease after 2025 if not extended. For business owners planning to pass their business on to heirs, changes to estate tax laws could have significant implications.

What You Need to Do: If you plan to pass your business on to family members or heirs, consider exploring strategies like gifting or establishing trusts before the exemption levels decrease. Consult with an estate planning professional to ensure your succession plan remains tax-efficient in light of potential changes.

Final Thoughts: Be Proactive and Plan Ahead

As we approach 2025, it’s clear that business taxes will continue to evolve. From corporate tax rate adjustments to new credits, deductions, and compliance requirements, staying informed and proactive is key to minimizing your tax burden and ensuring long-term business success.

By working closely with a tax advisor and staying ahead of these changes, you can position your business to thrive despite the shifting tax landscape. Now is the time to start planning for the upcoming tax year to ensure that your business remains compliant, efficient, and ready for whatever 2025 has in store.

Need help navigating these changes? Reach out to us today to ensure your business is prepared for the future.