The Most Important Tax Law Changes You Need to Worry About

A Guide for Small Business Owners and High-Income Earners by James R. Leichter

There have been several significant federal tax law changes and adjustments for 2024 that small business owners and high-income individuals should be aware of. These also apply to the 2025 tax year.

These changes highlight the importance of staying informed and planning accordingly to take advantage of new benefits or mitigate potential increases in tax liability.

Tax Brackets and Inflation Adjustments

The IRS has adjusted the income thresholds for federal tax brackets to account for inflation. The marginal tax rates remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%, but the income ranges for each bracket have been modified. For instance, the 37% rate now applies to individual incomes over $609,350 and married couples filing jointly with incomes over $731,200 (IRS) (NerdWallet: Finance smarter).

Standard Deduction Increases

The standard deduction has increased for all filing statuses. Single taxpayers and married individuals filing separately can take a standard deduction of $14,600, up from $13,850. Heads of households can take a deduction of $21,900, up from $20,800 (NerdWallet: Finance smarter).

Child Tax Credit and Earned Income Tax Credit

The Child Tax Credit (CTC) has been enhanced under the Tax Relief for American Families and Workers Act of 2024. The credit is now indexed to inflation, and the refundable portion has been incrementally increased for the years 2023 through 2025. The Earned Income Tax Credit (EITC) expansion for workers without qualifying children, initially part of the American Rescue Plan Act, has been made permanent (Thomson Reuters Tax & Accounting) (Tax Foundation).

Business Deductions and Incentives

The new tax law includes provisions for businesses to stimulate economic growth. Full and immediate expensing for investments in machinery, equipment, and vehicles has been restored. Additionally, businesses can immediately deduct U.S.-based research and development investments rather than spreading them over five years. The amount of investment that small businesses can immediately write off has been increased to $1.29 million (Thomson Reuters Tax & Accounting).

High-Income Individual Provisions

There are specific measures targeted at high-income individuals. These include taxing long-term capital gains and qualified dividends at ordinary income tax rates for those with incomes above $1 million, and a proposed 25% “billionaire minimum tax” on unrealized capital gains for high-net-worth taxpayers. Additionally, limitations on retirement account contributions for individuals with large IRA balances and tighter rules on estate tax and like-kind exchanges have been proposed (Tax Foundation).

Consulting with a tax professional can help navigate these adjustments and ensure compliance while optimizing your tax situation.

You may be interested in reading these articles that are related to federal income tax changes and updates.

Introduction to the United States Tax System

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James R. Leichter (about me)

Majority Shareholder
RA Tax and Accounting, Inc.
Phone: (913) 894-8877