2025 Tax Updates for Construction Business Owners and Their Teams
11/08/2024The IRS has released the 2025 tax adjustments, bringing changes to deductions, credits, and thresholds that could impact your business and employees. Here’s a practical rundown of what’s new and how it may benefit you:
Higher Standard Deduction
For 2025, the standard deduction has gone up, which could be useful for employees who don’t itemize:
- Single Filers: $15,000 (up $400 from 2024)
- Married Filing Jointly: $30,000 (up $800)
- Heads of Household: $22,500 (up $600)
This increase could help your team members lower their taxable income, resulting in a bit more take-home pay.
Adjusted Tax Brackets
While the top rate of 37% is unchanged, the income thresholds for other tax brackets have moved:
- 35% for income over $250,525 (single) or $501,050 (married)
- 32% for income over $197,300 (single) or $394,600 (married)
- 22% for income over $48,475 (single) or $96,950 (married)
By knowing where you and your team fall within these brackets, you can better plan contributions and deductions to manage taxable income throughout the year.
Alternative Minimum Tax (AMT) Updates
The AMT exemption has increased to $88,100 for individuals and $137,000 for couples, with phase-outs starting at $626,350 and $1,252,700 respectively. This may be relevant for high earners who could find themselves subject to AMT.
Expanded Earned Income Tax Credit (EITC)
For employees with larger families, the maximum EITC for those with three or more children has risen to $8,046. This can provide substantial tax relief and increase refunds for those eligible.
Updates to Fringe Benefits & Health Flexible Spending
The IRS has also adjusted pre-tax benefits:
- Transportation & Parking: Monthly limits have increased to $325.
- Health Flexible Spending Arrangement (FSA): Contribution limit is now $3,300, with a carryover max of $660.
These adjustments can help construction business owners offer valuable tax-advantaged benefits to employees, reducing taxable income while covering healthcare and commuting expenses.
Medical Savings Account (MSA) Changes
For MSAs in 2025, both minimum deductibles and out-of-pocket limits have increased:- Self-only Coverage: Minimum deductible is $2,850, with a max out-of-pocket of $5,700.
- Family Coverage: Minimum deductible is $5,700, with a max out-of-pocket of $10,500.