As a Shopify seller, staying informed about tax updates is essential to managing your business effectively and ensuring long-term success. The Internal Revenue Service (IRS) recently announced the annual inflation adjustments for the 2025 tax year, impacting several critical tax provisions. These updates, which will apply when filing 2025 returns in 2026, provide opportunities for smart tax planning that can keep more money in your business.
As Proverbs 27:23 reminds us, “Be diligent to know the state of your flocks, and attend to your herds.” This verse emphasizes the importance of careful stewardship—a principle we can apply to managing our businesses and finances. Let's break down the key updates for 2025 and explore their implications for Shopify sellers.
1. Increased Standard Deductions
For 2025, the standard deduction increases across all filing statuses:
Single: $15,000 (up $400 from 2024)
Married Filing Jointly: $30,000 (up $800 from 2024)
Head of Household: $22,500 (up $600 from 2024)
Example: If you’re a married Shopify seller with $80,000 in taxable income, the increased deduction reduces your taxable income to $50,000. This change could save you hundreds of dollars in taxes, freeing up funds to reinvest in your business.
2. Updated Marginal Tax Rates
The tax brackets for 2025 remain consistent in structure, but updated thresholds impact taxable income:
37%: Income over $626,350 (single) or $751,600 (married filing jointly)
35%: Over $250,525 (single) or $501,050 (married filing jointly)
24%: Over $103,350 (single) or $206,700 (married filing jointly)
Example: A Shopify seller with $250,000 in taxable income would pay 24% on income between $103,350 and $197,300, but the next $52,700 would fall into the 32% bracket. Knowing these thresholds helps in timing deductions and income to optimize tax outcomes.
3. Earned Income Tax Credit (EITC) Increases
The maximum EITC for 2025 is $8,046 for taxpayers with three or more qualifying children.
Example :A family-owned Shopify business with three children earning $50,000 in adjusted gross income may qualify for the full $8,046 credit. This significant benefit can help offset taxes and provide resources for both business and family needs.
4. Changes to Qualified Transportation and Health FSAs
Monthly transportation benefit limit: $325 (up $10)
Health Flexible Spending Account (FSA) limit: $3,300 (up $100)
Example: If you offer transportation benefits to employees, the higher limit allows for additional pre-tax savings. Similarly, increasing FSA contributions by $100 can cover more out-of-pocket medical expenses tax-free.
5. Medical Savings Account (MSA) Adjustments
For 2025, the self-only coverage deductible must be between $2,850 and $4,300, with an out-of-pocket max of $5,700. Family coverage deductibles range from $5,700 to $8,550, with a $10,500 out-of-pocket max.
Example: If you have self-only MSA coverage, contributing up to the maximum deductible amount can provide tax-advantaged savings to offset healthcare costs while meeting the new limits.
6. Estate and Gift Tax Updates
Estate Tax Exclusion: $13,990,000 (up $380,000)
Gift Tax Exclusion: $19,000 (up $1,000)
Example: If you plan to pass on business assets or gift shares in your Shopify store, these increased limits provide more flexibility for tax-efficient wealth transfers.
7. Foreign Earned Income Exclusion
The foreign earned income exclusion rises to $130,000 for 2025, up from $126,500.
Example: If you’re selling internationally and earn income abroad, you can now exclude an additional $3,500 from taxation, reducing your overall tax liability.
Applying These Updates to Your Business
These updates are not just numbers—they represent opportunities to manage your finances wisely and keep more of your hard-earned money. By understanding the changes and planning proactively, you can align your tax strategy with your business goals.
As Proverbs 27:23 encourages, diligence and attention to detail are essential in managing your financial “flocks.” Whether it’s leveraging deductions, optimizing tax credits, or planning for the future, these adjustments provide tools to steward your business effectively.
Need Help Navigating These Changes?
“If you have any questions or need personalized help, don’t hesitate to reach out. Schedule a call with Jacob by going to https://www.jacobcurtiscpa.com/7-shopify-mistakes-calendar. We're here to help you piece together financial freedom.”
Comments