Family business tax planning matters every year, but in 2025, new rules could reshape your cash flow and long-term plans. The One Big Beautiful Bill Act and other federal updates bring changes to various tax areas including estate and gift exemptions, pass-through rules, and SALT workarounds. At the same time, states are adjusting business credits, PTET elections, and income-sourcing rules; which you must pay attention to if your business operates in more than one state.
In this blog, we look into:
- Key federal tax rule changes that affect family businesses.
- Notable state updates and what they mean if you operate across multiple states.
- Practical steps to stay compliant and optimize your 2025 family business tax position.
Key Federal Law Updates Affecting 2025 Family Business Tax
Here’s how this year’s federal changes could directly impact your business tax, and what to do about them.
Changes to Income Tax Rates & Brackets
Rates stay at 10%, 12%, 22%, 24%, 32%, 35%, and 37% – this is now permanent under the new law, but bracket thresholds have increased. For example, the 10% bracket for single filers now tops out at $11,925 (up from $11,600) and the 37% bracket starts at $626,350 (up from $609,350).
This means that if you’re taking salaries or distributions through a pass-through entity, it could push part of your income into a higher bracket. Review your salary vs. dividend mix with your CPA or business advisor to safeguard yourself against unnecessary taxation.
Updates to Estate and Gift Tax Exemptions
The lifetime estate and gift tax exemption is $13.99 million per person in 2025 (up from $13.61 million in 2024) and is set to increase to $15 million in 2026, with annual inflation adjustments thereafter. The annual gift exclusion is now $19,000 per recipient, giving you more room to transfer wealth tax-free. If your succession plan includes moving shares, property, or other major assets to the next generation, acting now can help you lock in these higher limits.
Qualified Business Income (QBI) Deduction
The 20% QBI deduction for pass-through entities such as S corps, partnerships, and sole proprietorships is now permanent under the new law. For 2025, the phase-out begins at $383,900 for joint filers and $191,950 for all other filers. If your family business’s taxable income is near these levels, you could lose part of this deduction. To avoid this, you can consider adjusting the timing of expenses, bonuses, or distributions so you can stay within range and claim the full deduction. Your CPA or family business tax advisor can help you map out the best approach.
Changes to Business Deductions
- Section 179 expensing now allows you to deduct up to $2.5 million in qualifying equipment, vehicles, and certain property in 2025. This is double the previous $1.25 million limit, with the phase-out threshold raised from $3.13 million to $4 million. This means that once your total purchases go over $4 million, that $2.5 million limit starts shrinking dollar-for-dollar. By the time you reach $6.5 million in purchases, the deduction is gone for that year. In other words, the more you spend above $4 million, the smaller your Section 179 write-off will be until it disappears completely.
- Bonus depreciation is restored to 100% for qualifying property placed in service after Jan 19, 2025. This lets you deduct the full cost of qualifying assets in the year you start using them, which can greatly reduce your taxable income. So, if you’re planning to invest in equipment or facility upgrades, this year may be the best time to set the plan in motion.
State-Level Reform Trends Affecting Family Business Tax
Beyond federal rule changes, state laws also put you at risk of penalties and influence your family business tax bill. Watch for these changes if you have multi-state operations. Big state moves you should know about:
California (CA)
- PTET extended (2026–2030): If your family business is set up as a partnership or S Corp, you can keep using California’s elective PTET through 2030. This lets you pay California income tax at the business level and claim a credit on your personal return. This often helps to lower your overall tax bill.
- 2025 prepayment rule: If you operate in California, you must prepay at least $1,000 or 50% of the previous year’s PTET by June 15 to keep the state tax deduction. Starting in 2026, missing the deadline will cut your credit by 12.5% of the unpaid amount.
- Financial institutions’ apportionment: If your family business is in banking or financial services, California will base 2025 taxes only on in-state sales instead of also factoring in property and payroll as it did previously. This means that more California clients will translate to a higher tax bill; while out-of-state clients could translate to potential savings.
New York (NY)
- PTET election deadline: For 2025, New York State and New York City PTET elections must be made by March 15, 2025. This isn’t new, but unlike most states that let you decide when filing your return the next year, New York requires you to lock in the election months before finalizing income. Miss the deadline and you can’t opt in for that year, even if you otherwise qualify.
Texas (TX)
The no-tax-due threshold for Texas franchise tax rises from $1.23M to $2.47M in 2025. If your family business is under this limit, you won’t owe franchise tax, but you still have to file a Public/Ownership Information Report.
Florida (FL)
- Commercial lease tax canceled: Starting Oct 1, 2025, Florida eliminates both state and local sales tax on commercial real estate leases. This marks a major shift, as Florida was one of the few states taxing commercial leases. Expect lower occupancy costs if your lease runs through late 2025, and update payment systems to remove tax charges after September.
- No personal income tax: Florida remains one of the few states with no personal income tax, which means PTET elections – common in many other states; don’t apply here. This simplifies multi-state planning and shifts the focus to corporate franchise tax exposure (5.5%) if your family business operates as a C-corp.
Family Business Tax: 2025 Best Practices Checklist
Federal and state tax changes make 2025 a year to plan ahead. Use this checklist to keep your family business compliant and ready for opportunities:
- Set salaries wisely: Follow rules on wages and owner distributions to keep pay compliant and tax-efficient. Maintain clean records for all owner reimbursements.
- Hire family right: Pay only for actual work, at fair market rates, with timesheets and proper year-end forms to avoid IRS issues.
- Leverage PTET: If your state offers it, elect on time and align owner distributions with the withholding needed for new brackets and any PTET or entity-level taxes. Look for available credits to reduce your taxable income.
- Protect your QBI: Monitor taxable income against phase-out limits and time expenses to preserve the 20% deduction.
- Time major purchases: Schedule equipment or vehicle buys to maximize Section 179 expensing and bonus depreciation.
- Check multi-state exposure: Confirm nexus, PTET availability, and filing thresholds if you operate in more than one state.
- Update ownership and gifting: Adjust share allocations and gifts to match current estate and gift tax limits.
- Refresh succession documents: Make sure wills, trusts, buy-sell agreements, and funding match your latest valuation.
Our team works with family businesses across the U.S. to align tax strategy with your long-term goals. From PTET elections to succession planning, we can help you protect your wealth and stay compliant. Contact us today!
The information presented in this blog article is provided for informational purposes only. The information does not constitute legal, accounting, family business tax advice, or other professional services. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability of the information contained herein. Use the information at your own risk. We disclaim all liability for any actions taken or not taken based on the contents of this blog. The use or interpretation of this information is solely at your discretion. For full guidance, consult with qualified professionals in the relevant fields.