Small Business Tax Code and Business Regulation Changes in 2025: What Ohio Business Owners Need to Know
As we approach 2025, small business owners in Ohio must prepare for significant changes to the tax code and business regulations that could impact their operations. Understanding these upcoming changes is crucial for strategic planning and compliance. Here’s a breakdown of what to expect and how to navigate these adjustments.
1. Revised Limits to the Section 179 Expense Deduction
The Section 179 expense deduction, which allows businesses to deduct the purchase price of qualifying equipment and software purchased or financed during the tax year, has been revised, largely taking into account inflation. E.g., the cost limit for sport utility vehicles expensed under section 179 is increased to $31,300. While the current limits are favorable, discussions are ongoing regarding potential adjustments to these limits or the list of eligible expenses. Small business owners should evaluate their upcoming capital expenditures to take full advantage of this deduction before any changes take effect.
2. Changes to Depreciation Rules
In 2025, businesses will see a continuation of the phase-outs related to how they can depreciate certain assets. The current bonus depreciation provisions are set to phase out by the end of 2026, dropping 20% each year. This means that small businesses will need to consider how they account for long-term assets and their depreciation schedules. Strategic planning around asset purchases will be vital to minimize tax liability. E.g., if a business places a qualifying asset into service in 2024, it can depreciate 60% of the cost; if that business waits until 2025, it can only depreciate 40%.
3. Adjustments to Tax Rates
Potential adjustments to tax rates could be on the horizon. As the government reviews revenue needs and economic performance, tax brackets for small businesses may change. Business owners should stay informed about proposed changes to the federal and state tax rates, as these can significantly impact net income and overall financial health.
4. New Reporting Requirements
With advancements in technology and a push for greater transparency, new reporting requirements for small businesses are likely to be implemented. These could involve enhanced reporting on income sources, expenses, and deductions. Understanding these requirements ahead of time will help business owners ensure compliance and avoid potential penalties. The major change beginning in 2024 and carrying through 2025 is reporting under the Corporate Transparency Act, which requires companies to identify and provide information for its “beneficial owners.” If a company is formed in 2025, it has 30 days to comply with these reporting requirements. Business owners should ensure compliance with these filing requirements to avoid penalties.
5. Changes in Payroll Tax Regulations
As states continue to adapt to changing workforce dynamics, payroll tax regulations may also see modifications. Ohio business owners should be vigilant about potential changes in state payroll tax rates or regulations governing employee classifications. Compliance with updated payroll regulations is crucial to avoiding fines and maintaining a good standing with tax authorities.
6. Impact on Pass-Through Entities
For small businesses operating as pass-through entities (like S corporations and LLCs), changes in the tax treatment of these entities could have significant implications. Proposals to alter how income is taxed for pass-through entities may be on the table.
Business owners should evaluate their business structure and consider whether any changes might be beneficial considering the upcoming tax code revisions.
Tax code and business regulation changes present both challenges and opportunities for Ohio small businesses. Staying informed and proactive will be essential for navigating these changes successfully. Consulting with a tax professional or legal advisor can help you strategize and make informed decisions that align with your financial goals.
