What’s New for 2025

The following items highlight a number of administrative and tax law changes for 2025. They are discussed in more detail throughout this publication.

Standard mileage rate. The business standard mileage rate for 2025 has increased to 70 cents per business mile. See chapter 4.

Increased section 179 expense deduction dollar limits. The maximum amount you can elect to deduct for most section 179 property you placed in service in 2025 has increased to $2,500,000. This limit is reduced by the amount by which the cost of the section 179 property placed in service during the tax year exceeds $4,000,000. Also, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2025 is $31,300. See chapter 7.

Changes to special depreciation allowance. The 100% special allowance is restored for qualified property acquired and placed into service after January 19, 2025, including tangible property with a class life of 20 years or less, computer software, qualified improvement property, and certain other property. The 100% special allowance for depreciation is also permanently restored for specified plants (like fruit trees) when they are planted or grafted after January 19, 2025. However, property put into service between January 1, 2025, and January 19, 2025, or acquired before January 20, 2025, and put into service later will remain subject to the phase-down rules under prior law. See chapter 7.

Special depreciation allowance for qualified production property. You can elect to take a 100% special depreciation allowance for qualified production property placed in service after July 4, 2025, and before January 1, 2031. See chapter 7.

Expansion of mandatory postponement. Certain taxpayers affected by federally declared disasters and qualified state declared disasters after July 24, 2025, may be eligible for a mandatory 120-day extension for certain tax deadlines. For more information, see Pub. 547, Casualties, Disasters, and Thefts.

Extension of limitation on personal casu- alty and theft losses. For tax years beginning after 2017, the limitation on casualty and theft losses for personal use property is now permanent.

Extended disaster relief benefits. The Federal Disaster Relief Tax Relief Act of 2023 extended the special rules and return procedures for personal casualty losses attributable to certain major federal disasters declared between February 26, 2021, and February 10, 2025. P.L. 119-21, commonly known as the One Big Beautiful Bill Act (OBBBA), further extended the special rules and return procedures for personal casualty losses attributable to certain major federal disasters declared between February 11, 2025, and September 2, 2025. Qualified disaster losses can be claimed on Form 4684, Casualties and Thefts. For more information, see Qualified disaster losses in chapter 11.

Qualified wildfire relief payments. Certain relief payments received between 2020 and 2025 following a wildfire disaster are not taxable. For more information, see Qualified wildfire relief payments in chapter 11.

East Palestine disaster relief payments. Certain relief payments for the train derailment in East Palestine, Ohio, on February 3, 2023, are not taxable. For more information, see East Palestine disaster relief payments in chapter 11.

Maximum net earnings. The maximum net self-employment earnings subject to the social security part (12.4%) of the self-employment tax is $176,100 for 2025, up from $168,600 for 2024. There is no maximum limit on earnings subject to the Medicare part (2.9%) or, if applicable, the Additional Medicare Tax (0.9%).

The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2026 will be discussed in the 2025 Pub. 334.

Social security and Medicare taxes for 2025. The social security tax rate on these wages is 6.2% each for the employee and employer. The social security wage base limit is $176,100.

The Medicare tax rate is 1.45% (0.0145) each for the employee and employer, unchanged from 2024. There is no wage base limit for Medicare tax.

2025 withholding tables. The federal income tax withholding tables are now included in Pub. 15-T, Federal Income Tax Withholding Methods.

Direct deposit of Form 943 refund is now available. Executive Order (EO) 14247 , Mod- ernizing Payments To and From America’s Bank Account, issued on March 25, 2025, promotes operational efficiency by mandating the

2 Publication 225 (2025)

transition to electronic payments for all federal disbursements. Accordingly, the IRS will not issue Form 943 tax refunds by direct deposit. Direct deposit is a fast, simple, safe, and secure way to have your refund deposited automatically to your checking or savings account. Instead of a direct deposit refund, you can still choose to have your Form 943 overpayment applied to your next return by checking the appropriate box on Form 943, line 16b.

Make balance due payments electronically. EO 14247 also promotes operational efficiency by mandating the transition to electronic pay- ments for all payments made to the federal government. Therefore, pay your balance due on Form 943 electronically. There are several easy, safe, and secure ways to pay your balance due electronically.

No federal income tax on qualified overtime compensation. For tax years beginning after 2024 and ending before 2029, OBBBA allows individuals to deduct up to $12,500 ($25,000 if married filing jointly) in qualified overtime compensation. See chapter 13 and the Instructions for Form 1040. Also, monitor IRS.gov for more information and the latest updates.

Election to pay tax on farmland sale or ex- change in installments. OBBBA created a new section 1062 that allows taxpayers to elect to pay the net income tax attributable to the gain on the sale or exchange of qualified farmland property to a qualified farmer through four equal annual installments beginning in the year of sale or exchange. This election is available for tax years beginning after July 4, 2025. For more information, see section 1062 and the new Form 1062 when it becomes available.

Domestic research and experimental ex- penditures. Beginning in 2025, research and experimental (R&E) expenses can be fully deducted on your tax return. Certain small businesses may elect to apply the full expensing of R&E expenses retroactively by amending returns back to 2022. You can also elect to charge your R&E expenses to a capital account and amortize the costs ratably over a period of no less than 60 months. See Revenue Procedure 2025-28 for more information.

Sustainable aviation fuel (SAF) mixture credit. The SAF credit has been terminated and will no longer apply to any sale or use after September 30, 2025.