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2025 Tax Limit Increases for Businesses

Each year, various tax-related limits that impact businesses are adjusted for inflation. For 2025, several of these tax limits have increased, though the rate of increase has slowed due to cooling inflation. We’ve summarized the major changes below – that may affect you and your business.

 


Tax Deductions Compared to 2024

1. Section 179 Expensing:

  • Expensing 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)

 

2. Qualified Business Income Deduction (Sec. 199A) Income-Based Phaseouts:

  • Married filing jointly: $394,600 (up from $383,900)

  • Other filers: $197,300 (up from $191,950)

 

Retirement Plan Contribution Limits Compared to 2024

1. 401(k) Plans:

  • Employee contribution limit: $23,500 (up from $23,000)

  • Catch-up contributions (age 50+): $7,500 (unchanged)

  • Catch-up contributions for ages 60-63: $11,250 (new for 2025)

 

2. SIMPLE Plans:

  • Employee contribution limit: $16,500 (up from $16,000)

  • Catch-up contributions (age 50+): $3,500 (unchanged)

  • Catch-up contributions for ages 60-63: $5,250 (new for 2025)


3. Other Retirement Limits:

  • Combined employer/employee defined contribution plan limit (excluding catch-ups): $70,000 (up from $69,000)

  • Maximum compensation for contribution calculations: $350,000 (up from $345,000)

  • Annual defined benefit plan benefit limit: $280,000 (up from $275,000)

  • Highly compensated employee compensation threshold: $160,000 (up from $155,000)

  • "Key" employee compensation threshold: $230,000 (up from $220,000)

 

4. Social Security Tax Cap:

 

Employee Benefits Compared to 2024

1. Qualified Transportation Fringe Benefits:

  • Monthly exclusion: $325 (up from $315)

 

2. Health Savings Accounts (HSA) Contribution Limits:

  • Employee Individual coverage: $4,300 (up from $4,150)

  • Family coverage: $8,550 (up from $8,300)

  • Catch-up contribution (age 55+): $1,000 (unchanged)


3. Flexible Spending Accounts (FSA):

  • Health care contribution limit: $3,300 (up from $3,200)

  • Health care FSA rollover limit (if permitted by plan): $660 (up from $640)

  • Dependent care contribution limit: $5,000 (unchanged)

 

Potential Tax Policy Changes in 2025

While these inflation-based adjustments are set, additional tax changes could be on the horizon. Several proposed tax policy revisions may impact businesses and individuals, and a few potential changes include:

 

  • A reduction in the corporate tax rate (currently at 21%)

  • The elimination of taxes on overtime pay, tips, and Social Security benefits

 

These proposals, if enacted, could significantly affect tax planning strategies. Staying informed and proactive is crucial. If you have any questions about how these changes may impact your business, consult with your VAAS Pro Tax Professional for guidance.

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