Keeping yourself informed and updated about changes in tax laws and policies is essential for individuals and businesses alike. It is more crucial when the proposed changes significantly impact residents and companies. However, many businesses feel overwhelmed while navigating tax regulations. It is when they look for CPA firms that are committed to helping marketers adapt to changes and make strategic financial decisions.

Comprehensive Overview of the Key Updates

The new tax policies for the 2025 tax season have introduced notable updates that could impact how you file taxes, claim deductions, and manage your overall financial planning. Understanding them and staying compliant with current requirements is, therefore, essential to take advantage of available deductions and avoid costly penalties.

Keep reading to know about the latest tax updates in California and how they may impact you!

1. Permanent Individual Tax Cuts: Did you remember the 2017 Tax Cuts and Jobs Act (TCJA), which introduced lower individual tax rates? These cuts are scheduled to expire in 2025. With this in mind, the government has planned to make these cuts permanent. The proposed tax plan will lead to certain changes in tax filing and financial strategy.

Under the TCJA, the highest individual tax rate was reduced from 39.6% to 37% and the standard deduction nearly doubled. Now, if these cuts are made permanent, it would highly impact individuals. There will be lower tax liabilities for high-income earners and more disposable income for middle-class families. However, these could also increase the federal deficit, stimulating the government to make future adjustments in their expenses.

To be specific, lower federal tax rates might offset the high state tax burden. But if you check the increased government debt, it leads to long-term economic uncertainty. Consulting with a tax professional is the only way to understand these variations and make necessary planning.

2. Impact of Higher Tariffs: The government has imposed higher tariffs on imported goods to balance the potential loss incurred from permanent tax cuts. Trump has suggested a 20% general tariff on all imports and a 60% tariff on Chinese goods. Well, this strategy may protect domestic industries but simultaneously increase consumer prices and inflation.

California largely relies on imported goods. Therefore, higher tariffs on electronics, clothing, and raw materials will raise production costs for businesses. Being a marketer, you should assess supply chains and explore new ways to reduce such dependencies. Strategic financial planning is further needed to handle these pressures and stabilize long-term budgets.

3. Delaying Clean Energy Tax Credits: Tax benefits for making energy-efficient improvements and investing in renewable energy have been a helpful way to reduce tax bills. According to current programs, you can get tax credits for installing solar panels, energy-efficient windows, and EV charging stations. However, these federal incentives are not guaranteed to last.

Delaying investments could mean missing out on valuable tax savings. For example, the Investment Tax Credit (ITC) for solar energy installation allows businesses to enjoy a 30% tax deduction. But this rate may decrease or be eliminated under future tax adjustments.

Hence, it’s crucial to check out these benefits while making these green investments, thereby contributing to environmental sustainability.

4. Counting on SALT Cap Changes: The State and Local Tax (SALT) deduction lets taxpayers reduce their federal taxable income by deducting state and local property, income, and sales taxes. The TCJA set this deduction at $10,000, a limit that significantly affects high-tax states – California.

While Trump has proposed removing the cap, it faces strong opposition due to its projected $1.2 trillion cost over the next decade. Therefore, counting on SALT cap changes to ease your tax burden could be risky.

5. Overlooking Retirement and Estate Planning: Many individuals overlook the changes to tax regulations while planning for their retirement. Well, studies say that these changes have a strong impact on retirement and estate planning.

Although Trump has proposed eliminating taxes on Social Security benefits, the change remains highly uncertain as it requires significant legislative action. Therefore, it’s recommended to avoid relying on this income and find new ways to minimize the taxes. For instance, strategically managing your retirement accounts, timing withdrawals carefully, and exploring tax-efficient strategies. Probably, consulting with a CPA expert can help provide tailored advice to your situation.

How Basta Can Help

Basta & Company aims to simplify tax complexities and help you make informed decisions. Our experienced tax professionals can help you:

• Maximize available deductions and credits
• Adjust your tax strategy based on new regulations
• Optimize financial planning
• Develop a long-term financial strategy to minimize liabilities and maximize savings.

The Bottom Line

Tax changes are inevitable but with the right guidance, you can navigate them confidently. Further, by working with a knowledgeable advisor, you can minimize liabilities, maximize deductions, and create a strategy that aligns with your financial goals.

Schedule a consultation with us and develop a personalized tax strategy for this year.

Start Planning!