Tax Code Changes to Watch in 2025
The New Year has come, and it has brought tax changes that could have a big impact on your business. Today’s post will cover the potential impact of these changes at the federal and state levels for those doing business (or thinking about doing business) in Louisiana.
Let’s go!
Looming Federal Tax Code Changes
When Congress and the President implemented the Tax Cuts and Jobs Act (TCJA) in 2017, it created the Qualified Business Income Deduction (QBI).
Some provisions of the TCJA, such as reducing the corporate tax rate to 21%, remain fixed, but the QBI is scheduled to sunset this year.
For pass-through entities like sole proprietorships, partnerships, and S-Corporations, that means losing the ability to deduct up to 20% of their qualified business income.
Bonus depreciation, which lets businesses more quickly deduct certain purchases like machinery and equipment, is another TCJA provision undergoing change. From 2018 to 2022, bonus depreciation remained at 100%.
However, the TCJA requires a 20% yearly reduction starting in 2023 and phasing out entirely in 2027.
The loss of the QBI and degradation of bonus depreciation will require businesses nationwide to adjust budgets and review tax strategies.
There is a possibility that both may remain in place. It was a Republican Congress and President Trump who enacted the TCJA in 2017, and both will control the reins of government again.
So, they may move to re-enact these TCJA provisions in some fashion. However, no matter who is in charge, the wheels of government move slowly, so the wisest approach is to plan for change.
Tax Changes in Louisiana
Last November, legislators in the Bayou State gave Governor Jeff Landry much of what he wanted regarding tax reform.
Effective Jan. 1, 2025, changes include a flat income-tax rate of 3% and an increase in the standard deduction per filer from $4,500 to $12,500. So, some business owners could see a reduction in taxes. At the least, none will face a personal income tax increase.
However, state lawmakers and Landry increased the state sales tax rate from 4.45% to 5%. So, businesses operating in Louisiana may have to review their tax strategies to accommodate those changes.
Additionally, lawmakers eliminated the state corporate franchise tax and reduced the corporate income tax rate, which can be as high as 7.5%, to a flat rate of 5.5%.
Landry’s tax plan also eliminated new applications for the Quality Jobs program, which helps manufacturers subsidize payrolls. Also axed were Enterprise Zone tax credits and, for some companies, the state inventory tax credit.
Other changes coming out of Baton Rouge require voters to agree to a constitutional amendment in a vote scheduled for March 29th.
Many aspects of the large amendment impact individual taxes, but businesses need to be aware that it would remove constitutional protection from many business tax exemptions if passed. So, instead of voters having a direct voice in those changes, lawmakers could remove them.
The Bottom Line
2025 is shaping up to be one of the most dynamic tax years for businesses since the TCJA was implemented in 2017. That means there will be a lot of information, some suspect.
Still, you have to keep up with it. The best way to do that is to go to the source and use information from the Internal Revenue Service and the Louisiana Legislature websites.
Some of the information there can be difficult to navigate, so consult with a tax professional at least quarterly to ensure you stay on top of major changes.
Here’s to a prosperous (and very interesting) new year!