Top Tax Trends to Watch in 2025: What Tax Professionals Need to Know

As tax professionals prepare for the upcoming 2025 tax year, staying ahead of emerging trends is crucial for delivering informed advice and optimized strategies for clients. Several legislative changes, regulatory updates, and technological advancements will significantly shape the tax landscape in 2025. This guide outlines the most critical trends tax professionals should monitor, with actionable insights on how to adapt and prepare for these changes.

Qualified Business Income (QBI) Deduction Changes

The Qualified Business Income (QBI) deduction, introduced under the Tax Cuts and Jobs Act (TCJA) in 2017, allows small businesses and self-employed individuals to deduct up to 20% of their qualified income. However, the QBI deduction is set to expire for certain businesses in 2025, particularly for specified service trades and businesses (SSTBs), such as law, healthcare, and consulting.

Key Impact:

Tax professionals must review their clients' QBI eligibility and assess potential impacts, especially for clients in SSTBs. It's also essential to track legislative efforts that may extend or modify these provisions.

Reference: For more details on the QBI deduction, see the IRS's [QBI Deduction FAQs](https://www.irs.gov/newsroom/qualified-business-income-deduction-faqs).

Corporate Transparency Act (CTA) Reporting Requirements

The Corporate Transparency Act (CTA) is set to go into full effect in 2025. This act requires businesses to report their beneficial owners (anyone owning at least 25% of a business or who has significant control) to the Financial Crimes Enforcement Network (FinCEN). This regulation aims to curb money laundering, tax evasion, and other financial crimes.

Key Impact:

Tax professionals working with LLCs and partnerships must ensure that clients understand and comply with these new reporting obligations. Failure to report could result in significant penalties.

Reference: Learn more about CTA compliance from [FinCEN's Corporate Transparency Act Guidelines](https://www.fincen.gov/corporate-transparency-act).

Increased IRS Audits and Enforcement

With enhanced funding from the Inflation Reduction Act, the IRS is expected to ramp up enforcement and audit activities in 2025. The agency will focus on industries with higher risks of underreporting income, overstating deductions, and classifying employees incorrectly as independent contractors.

Key Impact:

Tax professionals must encourage clients to maintain accurate records and adhere to IRS guidelines to minimize audit risks. It's especially important for businesses that frequently deal with contractors and home office deductions.

Reference: For guidance on handling IRS audits, review [IRS Publication 556](https://www.irs.gov/forms-pubs/about-publication-556).

Expiration of Bonus Depreciation

The 100% bonus depreciation provision, which allows businesses to deduct the full cost of eligible assets in the year they are placed in service, is set to phase out by the end of 2025. After 2025, the percentage of depreciation allowed will decrease annually until it phases out entirely.

Key Impact:

Tax professionals should advise clients to accelerate the purchase of qualifying assets before the bonus depreciation provision begins to phase out. This can lead to significant tax savings in 2025.

Reference: For more on depreciation, see [IRS Publication 946: How to Depreciate Property](https://www.irs.gov/publications/p946).

Evolving Tax Credits for Green Energy Initiatives

The push toward sustainable energy continues to shape tax policy. In 2025, several new tax credits and extensions are expected to support investments in renewable energy, electric vehicles (EVs), and energy-efficient improvements.

Key Impact:

Tax professionals should familiarize themselves with the new energy tax credits, such as the Clean Energy Credit and EV tax credits, and help clients leverage these incentives for both personal and business-related energy investments.

Reference: More information can be found at [IRS Energy Incentives for Individuals](https://www.irs.gov/credits-deductions/individuals/energy-incentives).

Rise of Digital Currency and Cryptocurrency Taxation

Cryptocurrency regulation and taxation are expected to intensify in 2025, with new reporting requirements for digital assets. The IRS has already begun to focus more heavily on crypto transactions, but 2025 could see clearer definitions and more stringent rules on digital currency reporting.

Key Impact:

Tax professionals should advise clients who deal with cryptocurrencies to keep detailed transaction records. Staying updated on new cryptocurrency tax regulations is vital to ensure compliance and prevent penalties.

Reference: Learn about current cryptocurrency taxation rules at [IRS Cryptocurrency FAQ](https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions).

Changes to Retirement Plan Contributions

The government is considering adjustments to retirement plan contribution limits, including changes to 401(k) and IRA limits, which may be implemented in 2025. The goal is to encourage more Americans to save for retirement by offering higher contribution limits and potential tax benefits.

Key Impact:

Tax professionals should monitor changes to retirement plan contribution limits and advise clients accordingly. Higher contribution limits could offer additional tax-deferred savings opportunities for both individuals and small business owners.

Reference: For current retirement contribution limits, refer to [IRS Publication 560: Retirement Plans for Small Businesses](https://www.irs.gov/forms-pubs/about-publication-560).

Evolving International Tax Regulations

International taxation will continue to evolve, with new regulations affecting cross-border transactions, transfer pricing, and corporate tax rates. These changes are designed to minimize profit shifting and ensure that businesses pay appropriate taxes in the countries where they generate revenue.

Key Impact:

For tax professionals working with multinational clients, understanding these international tax rules is essential. Ensuring compliance with new global tax standards will be crucial in minimizing the risk of penalties and double taxation.

Reference: For details on U.S. international taxation, refer to [IRS International Taxpayers](https://www.irs.gov/individuals/international-taxpayers).

Additional Resource: Find insights on global tax trends at [Deloitte’s International Tax Blog](https://www2.deloitte.com/global/en/services/tax.html).

Expanding Role of Artificial Intelligence in Tax Preparation

Artificial intelligence (AI) is transforming the tax preparation industry, from automating basic tax filings to identifying potential tax savings for businesses. In 2025, expect more advanced AI-driven tools to assist tax professionals in managing increasingly complex tax returns.

Key Impact:

Tax professionals should consider adopting AI tools to streamline their tax preparation processes, reduce errors, and improve overall client satisfaction. Staying updated on the latest AI tools can give tax professionals a competitive edge.

Reference: For insights on AI’s impact on tax preparation, see this article from [Accounting Today](https://www.accountingtoday.com/news/ai-and-the-future-of-tax-preparation).

Shifting Landscape of State and Local Taxation (SALT)

In 2025, state and local tax (SALT) regulations will continue to evolve, with some states increasing their income tax rates, while others provide more incentives for businesses to operate locally. Tax professionals should be mindful of these changes, particularly the SALT deduction cap, which may see modifications.

Key Impact:

Keeping track of state-level tax changes is vital for advising clients on the best strategies to minimize state and local tax liabilities. The SALT deduction cap is one area to watch, as any potential revisions could significantly impact higher-income earners.

Reference: For up-to-date information on SALT tax policies, visit the [Tax Foundation’s State and Local Tax Resources](https://taxfoundation.org/state-and-local-taxes/).

Additional Resource: Read more on state tax reforms from [Bloomberg Tax](https://pro.bloombergtax.com/).

Wrapping Up - Preparing for 2025

The tax landscape in 2025 will bring both challenges and opportunities for tax professionals and their clients. Staying ahead of these trends will require continuous learning, proactive planning, and adopting new tools to navigate an increasingly complex tax environment. By preparing now, tax professionals can position themselves as trusted advisors and offer the most value to their clients in the year ahead.

Additional Resources:

IRS Publication 535: Business Expenses https://www.irs.gov/publications/p535

FinCEN Corporate Transparency Act Guidelines https://www.fincen.gov/corporate-transparency-act

IRS Cryptocurrency FAQ https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

IRS Publication 560: Retirement Plans https://www.irs.gov/forms-pubs/about-publication-560

Tax Foundation’s SALT Deduction https://taxfoundation.org/state-and-local-taxes/

Accounting Today: AI in Tax https://www.accountingtoday.com/news/ai-and-the-future-of-tax-preparation

IRS Energy Incentives https://www.irs.gov/credits-deductions/individuals/energy-incentives

IRS International Taxpayers https://www.irs.gov/individuals/international-taxpayers

IRS Publication 946: Depreciation https://www.irs.gov/publications/p946

Deloitte’s International Tax Blog https://www2.deloitte.com/global