The IRS has released the annual inflation adjustments for tax year 2025. These numbers affect tax brackets, standard deductions, retirement contribution limits, and various business thresholds. Here are the figures that matter most for business owners planning for the year ahead.
Tax Brackets and Standard Deduction
The standard deduction increases to $30,000 for married filing jointly (up from $29,200) and $15,000 for single filers (up from $14,600). Tax bracket thresholds shift upward across all rates, meaning slightly more of your income falls into lower brackets. For a business owner earning $200,000, the bracket adjustments produce a modest tax reduction of a few hundred dollars compared to 2024.
Retirement Plan Limits
The 401(k) employee deferral limit increases to $23,500 (up from $23,000). The catch-up contribution for participants 50 and older remains $7,500. The total annual additions limit (employer plus employee contributions) rises to $70,000. For SEP-IRA contributions, the maximum increases to $70,000. Solo 401(k) owners can contribute the full employee deferral plus employer contributions up to the combined limit.
If you sponsor a retirement plan for your employees, update your plan documents and payroll systems to reflect the new limits effective January 1.
Business-Specific Numbers
The Section 179 expensing limit adjusts for inflation (the pre-OBBBA amount; this will be superseded if the bill passes). The qualified business income deduction thresholds shift upward. Health Savings Account contribution limits for 2025 increase to $4,300 for individual coverage and $8,550 for family coverage.
Estate and Gift Tax
The estate and gift tax exemption rises to $13,990,000 per individual. This is relevant for business succession planning: if your business is valued near or above this threshold, estate planning strategies should be reviewed. The exemption is scheduled to revert to approximately $7 million per person after 2025 unless Congress acts (which the OBBBA would address).
What to Do
Update your 2025 projections using the new numbers. Adjust quarterly estimated tax payments if the bracket changes affect your liability. Review retirement plan contribution strategies to maximize the increased limits. And if your estate plan was built around the current exemption level, discuss the sunset risk with your estate planning attorney.