RS485 terminating resistor power rating
I suspect the answer is in bold in the first line of your question. The resistor is between the data lines but the differential voltage is only a few volts - the common mode voltage can be anything but won't cause an increase in potential across the termination resistors.



Figure 1. Extract from Linear's TIA/EIA-485-A Standard.

The table above says that the limit is ±5 V. Rerunning your calculation gives \$ P = \frac {V^2}{R} = \frac {5^2}{120} = 0.208\ \mathrm W \$ max.

The 0.25 W resistor should be fine.