An Introduction To This Tax Season’s Changes

With each tax season, small business owners must stay updated on the latest tax laws and deduction changes. Now for 2024, several adjustments are due to inflation and shifts in federal tax policy. To clarify, updates to entertainment and meal deductions and various inflation-adjusted thresholds will likely impact many business owners. Let’s break down these changes and what they could mean for your business.Here are new tax deductions that could impact your small business in 2025.

New Tax Deductions that Could Impact Your Small Business in 2025

The IRS regularly revises tax policies to reflect economic shifts, such as inflation and the evolving landscape of business expenses. To clarify, these adjustments support small businesses by providing deductions that align more closely with actual costs, making tax filing more equitable and beneficial. Indeed, knowing these changes can help you maximize deductions, minimize liabilities, and better plan your finances for the year ahead. For better or worse tax deductions that could impact your business for the better are readily available.These changes include:

Entertainment Deductions
Meal Deductions- (These numbers fell to 50% after the COVID-19 relief adjustments.)
Mileage Deduction
Home Office Deduction
Equipment Depreciation- (See Higher Section 179)

Meal Deduction Reverts to 50%

For 2024, meal deductions revert to 50% after a temporary 100% deduction during COVID-19 relief efforts. Meals purchased for client meetings, staff gatherings, or work trips are eligible at this reduced rate. This change balances fiscal stimulus while attempting to revert to ante pandemic deduction norms.(A development that is taking a while to implement based on the post-pandemic culture.) Document necessary meals for business operations to meet deduction standards.

Mileage Deduction Increase

The IRS has increased the standard mileage rate for business purposes to 65.5 cents per mile due to inflation, reflecting higher fuel and vehicle maintenance expenses since 2022. The IRS scheduled this increase to 67 cents. Keep a detailed mileage log and the purpose of claiming this deduction, and read IRS mileage requirements beforehand.

Entertainment Deductions Adjustments

Previously, entertainment expenses were entirely nondeductible. This policy remains in effect; however, specific rules apply to events directly related to a company’s purpose. For example, tickets to seminars or conferences can remain deductible if directly relevant to business operations. Keep detailed records of business relevance if you deduct any event expenses.

Home Office Deduction Adjustments

The deduction calculations for home offices have slightly changed to account for rising home costs. However, while eligibility remains the same, your claim amount may be adjusted. Two methods are available: the simplified method based on square footage and the regular process, which considers actual expenses for utilities, internet, and rent or mortgage interest proportionate to the office space. Also, consider your business structure, such as LLC vs. S-Corp, as it can impact whether you should take this deduction.

Depreciation Rules on Equipment and Assets

Finally, the IRS updated expense rules under Section 179. For 2025, the deduction limit on new or used equipment has increased, benefiting businesses investing in substantial assets. Additionally, bonus depreciation begins to phase out gradually this year. Ultimately, consult your accountant to strategically plan large purchases and take full advantage of these tax provisions.

Keep in The Loop

In summary, look up your local tax laws, and always check the IRS website for updates on your regular business. Also, if you have a reliable accountant, they are most likely keeping up with all the changes in regulations. Indeed, you want to obtain tax deductions that could impact your tax bill or return for the better! At Franek Tax, we alleviate business owners’ pressure to keep in the loop. Furthermore, we are dedicated to the small business owners of the Triangle in Raleigh, NC. As a result, we try to spread our knowledge of taxes through our blog. North Carolina small business owners keep taxes and deductions from being caught up. Don’t Panic! Call Franek!