Tax rules for small businesses have moved a lot since 2024, and several of the figures that used to appear in this article were either out of date or could not be sourced at all. This version keeps only what we could check against the IRS, FinCEN or the SBA, and links each one.
- Bonus depreciation: back at 100% for qualified property acquired after 19 January 2025.
- Net operating losses: the temporary five-year carryback is gone; the 80% limit on carryforwards remains.
- Tax credits: paid family and medical leave, the Work Opportunity Tax Credit, and the now-closed Employee Retention Credit.
- Accounting method: the gross receipts test for cash accounting is indexed each year, so check the current figure rather than a number in an article.
- FinCEN beneficial ownership reporting: no longer required of US companies.
The hard part is not any single rule. It is that the rules change faster than most owners can track, and the cost of getting one wrong is a penalty rather than a missed opportunity.
Changes to Depreciation Rules
- First-year bonus depreciation is back at 100%. Treasury and the IRS issued guidance on the version amended by the One, Big, Beautiful Bill, which applies to qualified property acquired after 19 January 2025. Property acquired before that date falls under the old phase-down, so the date of acquisition decides your deduction.
- Passenger vehicles have their own annual caps, adjusted for inflation every year. An earlier version of this article gave a specific dollar figure that was several years stale. Check the current IRS limits for the year you placed the car in service.
Modifications to Net Operating Losses
- The five-year carryback that this article used to describe came from the CARES Act and applied only to losses arising in 2018, 2019 and 2020. It has expired. Most businesses now carry losses forward instead.
- The 80% limitation still applies: a carried-forward loss can offset up to 80% of taxable income, not all of it.
New and Enhanced Tax Credits
There are some ways to reduce what you owe:
- The Section 45S employer credit for paid family and medical leave, if you offer qualifying paid leave under a written policy.
- The Work Opportunity Tax Credit, for hiring from specified target groups.
- The Employee Retention Credit is closed to new claims and has been the subject of repeated IRS warnings about aggressive promoters. If someone is still selling you an ERC claim, be careful.
Changes to Accounting Methods
- Small businesses under a gross receipts threshold can use cash accounting instead of accrual. The threshold is indexed for inflation and has risen every year since the Tax Cuts and Jobs Act set it, so the specific number this article used to quote is no longer right. Look it up for your tax year.
- The same threshold also relieves you of the more onerous inventory and UNICAP rules.
Tax Relief for Disaster Victims
- If your business was hit by a federally declared disaster, there are additional deductions, credits and filing extensions. These are announced case by case, so check the IRS disaster relief page for your area.
Keeping up with these changes can save your business money. Talking to a tax professional is usually cheaper than the penalty for guessing.
The Problem: Challenges Posed by New Tax Laws
The pace of change creates several real problems for small business owners:
Confusion Over Evolving Rules
- Provisions arrive with sunset dates, get extended, expire, and occasionally come back. Bonus depreciation has been at 100%, then phased down, then restored, in under a decade.
- Deduction limits, loss carryovers, and credit eligibility all shift on different schedules, which is why a rule you looked up two years ago is not safe to rely on now.
Risks of Non-Compliance
- Because it’s so confusing, small businesses might report something wrong or miss a deadline.
- Even small mistakes can lead to fines or other problems.
- The IRS puts the gross tax gap at $496 billion for tax years 2014 through 2016, with a net gap of $428 billion after late payments and enforcement. An earlier version of this article claimed small businesses accounted for 60% of a $45 billion tax gap. Neither number matched the IRS, so we removed the claim rather than repair it.
Missing Out on Tax-Saving Opportunities
- New provisions bring credits that small businesses often do not notice until the year is closed.
- Credits for paid leave, for hiring from target groups, and for certain vehicle and energy purchases can be worth real money if you plan for them in advance rather than discovering them at filing time.
Overwhelming Administrative Workload
- Getting your business ready for these new tax rules means a lot of extra paperwork and changes.
- For small teams, this takes away time from their main jobs.
Inability to Make Informed Business Decisions
- New tax laws affect things like how much money you have, what you spend on following the rules, and how you plan for the future. But if you’re not clear on the new laws, it’s hard to make good decisions.
Expertise Gap to Decode Tax Complexities
- Most small business owners don’t have deep tax knowledge and rely on basic software. This makes it harder to understand the complicated parts of the law.
- Without someone to guide them, they can’t take full advantage of the new rules or protect themselves from risks.
The scale is large. The SBA’s Office of Advocacy counted 30.2 million small businesses employing 58.9 million people in its 2018 US profile, and its more recent profiles put the count higher still. This article previously said “over 60 million small businesses”, which appears to have come from confusing the employee count with the business count. It is now corrected.
The Solution: Strategies for Navigating New Tax Laws
Navigating new tax laws might seem tough, but with a smart plan, small businesses can handle it well. Here are some steps to help you out:
Step 1: Comprehensive Review of Business Structure and Finances
- Take a good look at how your business is set up and see if it fits well with the new tax rules. Maybe changing to a different setup like an S-corp or LLC could work better for you.
- Go over your money – what’s coming in, what’s going out, what you own, and what you owe. This will help you see how the tax changes might affect your cash flow. Update your future money plans based on this.
Step 2: Claiming Tax Credits and Incentives
- Check the credits you may already qualify for: the Section 45S paid family and medical leave credit, the Work Opportunity Tax Credit, and disaster relief provisions if a declared disaster hit your area.
- Several credits have expiry dates. If you qualify now, claiming now is worth more than planning to claim later.
- Plan purchases and hiring around credits you expect to qualify for, rather than looking for credits after the fact.
Step 3: Engaging in Strategic Tax Planning
- Talk to tax experts to get help with the tricky parts of the new tax laws and advice that fits your business.
- Use accounting software that’s up to date with the latest tax rules to make following them easier.
Step 4: Staying Informed and Adaptable
- Keep an eye on official IRS updates to stay on top of the latest tax news and advice.
- Be ready to change your tax plans quickly if new information comes out or if things get clarified.
- Keep talking to your tax advisors and update your money plans from time to time.
By being proactive, staying informed, and getting the right advice, small businesses can adjust well to the new tax rules. The most important thing is to keep up with changes and use them to your advantage through careful planning.
What We Removed, and What to Do Instead
This article used to carry three case studies: an eco-boutique called Green Goods, a renovation firm called Clark Construction, and a bookkeeping practice called Fulton Accounting Services, each with a quote from its owner. None of those businesses or people could be traced. We removed all three. Here is the mechanism they were standing in for.
Entity choice is an arithmetic problem, not a preference
The S corporation question comes down to whether the payroll tax saved on distributions exceeds the cost of running payroll, filing a separate return, and paying yourself a defensible salary. Below roughly the point where your net profit comfortably exceeds a reasonable salary for your own work, it usually does not. An accountant can run this in an hour. Anyone who recommends an S corp without asking your profit figure is selling, not advising.
Timing matters more than finding an exotic deduction
Most of the money in small business tax planning comes from deciding when to buy equipment, when to recognise income, and when to pay expenses, not from an obscure credit. Bonus depreciation is the clearest example: the same purchase deducted in the right year is worth real cash, and in the wrong year is worth a schedule of small deductions over seven.
What usually goes wrong
Two things. First, the books are not current, so the planning conversation happens in March about a year that closed in December, when nothing can be changed. Second, an owner acts on a rule they read about without checking whether it still applies. Both are avoidable and neither requires expensive advice.
How to tell if your advisor is worth the fee
A good one asks about next year before finishing this year’s return. If your accountant only ever files, you have a filing service, not a tax advisor, and you should not expect planning value from it.
Conclusion
The recent tax law changes have made things a bit tricky for small business owners. But, by really getting to grips with what these changes mean, using the credits and advice available, and asking for help from experts, small businesses can find their way through.
Here are some simple tips:
- Keep checking how your business is doing and how these tax changes might affect it. Change your plans if you need to.
- Look out for credits and deductions you can use. Start at the IRS small business pages, which are free and authoritative. Commercial credit-recovery firms such as Innovation Refunds also advertise in this space; they are vendors, not a source of official guidance, and the IRS has warned repeatedly about aggressive ERC promotion.
- Plan your taxes with the help of accountants who know the ins and outs of the new rules. This will help you make the best moves for your business.
- Use the latest accounting software to make following the rules easier.
- Keep an eye on the IRS for any new updates and be ready to adjust your plans quickly.
Understanding the new tax laws can be tough, but you don’t have to figure it out alone. Getting advice from experts can help you avoid mistakes and find opportunities to save money and grow your business.
By staying informed, planning carefully, and following the rules, small businesses can handle these tax changes well. If you’re unsure about anything, reaching out to professionals who specialize in tax laws can be a big help.
Related Questions
Do small businesses still have to file a FinCEN beneficial ownership report?
No, not if the company is a US one. The Corporate Transparency Act reporting requirement took effect in January 2024, was suspended in early 2025, and then Treasury announced that FinCEN had permanently ended beneficial ownership reporting for US companies and US persons. Foreign companies registered to do business in the United States are still in scope. If you filed a report in 2024, you do not need to do anything further; if you were worried about missing the deadline, you can stop worrying. Check FinCEN’s BOI page before acting, since this rule has changed direction more than once.
What are the current IRS standard deduction amounts?
For tax year 2024 the standard deduction was $14,600 for single filers and $21,900 for heads of household. These are indexed annually, so check the IRS figure for the year you are filing. An earlier version of this article also claimed the IRS had expanded cryptocurrency as a payment method for tax bills. It has not, and we removed that.
What is the new IRS rule for LLCs?
There is no separate IRS filing that applies to LLCs as such. The obligation people usually mean is the FinCEN beneficial ownership report described above, which is a Treasury requirement rather than an IRS one, and which no longer applies to US companies. A single-member LLC’s federal income tax treatment is unchanged: by default it is disregarded and its income is reported on the owner’s return.
How does the TCJA affect small businesses?
The Tax Cuts and Jobs Act changed several things for small businesses:
- The qualified business income deduction for pass-through entities such as S corporations, partnerships and sole proprietorships.
- A limit on the deduction for business interest expense, generally 30% of adjusted taxable income.
- Bonus depreciation, which the TCJA set at 100%, then phased down, and which the One, Big, Beautiful Bill restored for property acquired after 19 January 2025.
- A gross receipts test that lets smaller businesses use cash accounting and skip the more demanding inventory rules.
Working with a tax professional can help you make the most of these. Careful planning is key.
More on this topic
Browse all 53 articles on Finance & Accounting, or jump straight to our buying guide: Best Accounting Software for Small Businesses.
