What New & Small Businesses Need to Know: The 2025 Tax Brackets & What’s Changed

There’s been another round of tax changes and while it’s easy to tune it out,

the truth is: what you don’t plan for can cost you.

So we’re cutting through the noise with just what you need to know:

What actually changed

Why it matters (especially if you’re self-employed)

What you can do right now to prep with clarity, not panic

Q4 is go-time.

Let’s make space for a tax season that feels more in your control.

Here’s what’s new for 2025 that might impact your small business taxes:

• Brackets adjusted for inflation

  You’ll likely see a bit more breathing room before hitting the next tax rate.

• Some 2017 tax cuts now permanent

  The rates and thresholds that were set to expire got locked in under new legislation.

• Section 179 deduction increased

  You can now deduct more (up to $2.5M) for equipment, tech, and improvements in the year you buy them.

• QBI deduction bumped to 23%

  If you’re a pass-through entity (LLC, S-Corp, sole prop), you might get a slightly bigger break on your qualified business income.

• 1099 reporting just got tighter

  More small biz income will get reported to the IRS, especially if you use payment apps or platforms.

In short? More deduction power, but also more eyes on your numbers.

So what do these tax changes actually mean for your business?

• You still get taxed personally

  If you’re an LLC, S-Corp, or sole prop, your business income flows through to your personal taxes. The bracket updates apply to you, not just your business.

• A better QBI deduction helps

  You might now deduct 23% (instead of 20%) of your qualifying business income. More money stays in your pocket.

• Big purchases may be more tax-friendly

  Buying equipment, tech, or tools? You can now write off more upfront, which lowers your taxable income for the year.

• Inflation adjustments = less “bracket creep”

  You won’t move into a higher tax rate just because of inflation. The IRS adjusted the income thresholds to match.

• Self-employment taxes still apply

  These are separate from income tax. Even with the updates, Social Security and Medicare taxes still hit your net profit if you're self-employed.

  
  

You might owe a little less, if your bookkeeping is solid and your tax strategy is intentional.

How tax brackets actually work:

Let’s clear this up: you don’t pay one tax rate on all your income. The U.S. tax system is layered, think of it like a staircase.

Here’s how it works:

• Each chunk gets taxed at its own rate

  You pay 10% on the first portion of your income, 12% on the next slice, 22% on the next, and so on. Only the income in each bracket gets taxed at that rate.

• Example: If you make $100,000 (after deductions), here’s a rough idea:

  • First ~$12K gets taxed at 10%

  • Next ~$36K at 12%

  • The rest (~$52K) at 22%

  • So your effective rate (what you actually pay on average)? Closer to 17%, not 22%.

    
    

So when someone says “I’m in the 22% bracket,” it just means the top part of their income is taxed at that rate, not all of it.

How to prepare and why an EA (Enrolled Agent) matters:

Want to avoid surprises this tax season? Here’s what to focus on:

• Track your numbers now

  Know your profit, keep expenses organized, and watch how close you're getting to higher tax brackets.

• Plan for big purchases

  If you need equipment or software, timing it right could save you big with the expanded Section 179 deduction.

• Pay attention to deductions

  Business meals, mileage, home office, they add up.

  Don’t leave them out.

• Adjust estimated payments if needed

  If your income changed a lot this year, update those quarterly payments to avoid penalties.

• Run the numbers ahead of time

  Play with a few income scenarios to see how different deductions and bracket thresholds could affect your tax bill.

  
  

Why Work With an EA (Enrolled Agent)?

An EA isn’t just a tax filer, they’re licensed by the IRS to specialize in tax.

• They stay on top of all the rule changes, including what’s quietly shifting behind the scenes.

• They know how to spot red flags and missed opportunities.

• And they can help you plan, not just patch things up at tax time.

With all the IRS changes in motion, it’s a smart year to have someone in your corner who knows where to look.

Tax season doesn’t have to be all stress and spreadsheets.

With the right plan and the right financial partner, you can walk in with confidence into tax season.

If you’re feeling the weight of these changes or just want to know what your numbers are really saying, we’re here. Get in touch with a tax expert & a team that gets it.

You don’t have to do it alone. That’s the SBS way.

Stillwater Business Solutions is run by Karolyn and Bryan, a tech-savvy and community-focused team who believe bookkeeping should feel collaborative and empowering—not confusing. Whether you're looking to simplify your systems or get support you can trust, we're here when you're ready. No pressure. Just people-first accounting that fits your business.