10 New California Laws to Consider in Your 2025 Tax Planning

As we step into 2025, California is implementing several new laws that could have a direct impact on your tax planning and financial strategy. These legislative updates touch on a wide range of topics, from employee benefits and freelance protections to financial transparency and insurance regulations. Let’s break down the key changes you should be aware of for your 2025 tax planning.

1. End of Certain Bank Fees

Starting January 1, 2025, Assembly Bill (AB) 2017 will prevent state-chartered banks and credit unions from imposing fees on declined ATM withdrawals due to insufficient funds. This move is part of California’s broader initiative to minimize unnecessary fees that burden consumers.

• Impact on Tax Planning: With these banking fees out of the picture, certain personal or business deductions may be reduced. This could be a good opportunity to review other areas of your tax strategy and ensure there aren’t additional savings or reductions to consider.

  2. Paid Family Leave Expansion

As of January 1, 2025, AB 2123 ensures that employees are no longer required to deplete their vacation days before they can access Paid Family Leave (PFL). This is a major shift that could affect how employees manage time off for family emergencies.

• For Individuals: Benefits from PFL may still be taxable, so it’s crucial to plan for any potential tax liabilities. Adjusting your withholding or making estimated tax payments could help avoid surprises.
• For Employers: Business owners will need to update payroll processes and policies to reflect the new regulations. This could have an impact on labor costs, requiring adjustments to your overall tax planning.

  3. Freelancer Payment Rights

Under SB 988, which takes effect January 1, businesses must pay freelancers according to the timeline specified in their contracts, or within 30 days if no date is outlined. This aims to streamline payment practices and protect independent contractors.

• For Freelancers: Timely payments will improve cash flow, helping freelancers manage quarterly tax obligations and more effectively track income and expenses.
• For Employers: Businesses should review contracts and payment schedules to avoid penalties for delayed payments and to ensure timely compliance with the law.

  4. Medical Debt Removed from Credit Reports

SB 1061, effective January 1, requires the removal of medical debt from credit reports, preventing it from impacting consumers’ credit scores. This law provides a fresh start for those with past medical expenses.

• Tax Implications: While medical debt no longer affects credit scores, having a better credit rating could open doors to financing options that offer tax benefits, such as lower interest rates on loans for homes or businesses.

  5. Easier Subscription Cancellations

Starting July 1, 2025, AB 2863 will require companies to provide the same method for canceling subscriptions that they use for sign-ups, making it easier for consumers to manage recurring expenses.

• For Individuals: This new rule could help reduce unnecessary subscriptions, which may free up funds that could be used for other financial goals or tax planning adjustments.
• For Businesses: If you operate a subscription-based service, ensure compliance with this law to avoid losing customers and to properly account for any potential revenue changes in your tax planning.

  6. Fertility Treatment Insurance Coverage

Beginning July 1, 2025, SB 729 mandates that large group health plans (covering 100 or more employees) must include coverage for fertility treatments, including in-vitro fertilization (IVF).

• Tax Planning Considerations: While expanded coverage could reduce out-of-pocket costs, any remaining expenses may still be deductible if they exceed the AGI threshold. Incorporating these expenses into your tax planning may yield savings.

  7. Wildfire Sick Leave for Agricultural Workers

SB 1105, effective January 1, extends sick leave benefits to farmworkers during emergencies such as wildfires, smoke exposure, heat, or flooding.

• For Agricultural Employers: These changes could lead to increased labor costs, but those costs may be deductible. Tracking these expenses is key, as they could influence your tax strategy during challenging times.

  8. Child Influencer Protection

As of January 1, new laws (SB 764 and AB 1880) require a portion of earnings from child influencers to be placed in trust accounts to safeguard their financial interests.

• For Parents: If you’re managing income for a child influencer, you’ll need to properly report the income held in trust. Understanding the tax implications is crucial.
• For Businesses: If your company works with child influencers, make sure you’re complying with the new trust fund requirements. This may affect contract structure and financial management.

  9. University Admission Reforms

Starting September 1, 2025, AB 1780 bans universities from using family wealth or donations as a factor in admission decisions, aiming for a more equitable admissions process.

• For Families: Families who have made donations in the past to influence college admissions might want to reassess their charitable giving strategies. Donations can still provide tax benefits, so planning how to structure future contributions remains important.

  10. Food Delivery Fee Transparency

Effective January 1, 2025, SB 1490 requires food delivery platforms, such as DoorDash, GrubHub, and Uber Eats, to provide detailed breakdowns of delivery fees. Additionally, restaurants will have the option to opt-out of these services.

• For Restaurants: The new rules could change how food businesses report revenue and manage expenses related to delivery fees. It’s important to track these changes to ensure compliance and accurately report expenses for tax purposes.
• For Contractors: Understanding how these fees are structured can help independent contractors better track and report expenses, improving tax accuracy.

Preparing for 2025 and Beyond

The laws set to take effect in 2025 are designed to improve financial transparency and fairness, but they also bring new considerations for your tax planning. From expanded benefits and protections for workers to changes in how you manage business and personal finances, these new regulations will likely affect your tax strategy.

To navigate these changes effectively, it’s a good idea to consult with a tax professional who can help optimize your financial planning for 2025 and beyond. With proper preparation, you can stay ahead of the curve, comply with new laws, and minimize your tax liabilities.

If you need further assistance or have any questions about how these changes might impact your taxes, feel free to reach out to me at 323-902-1000 or via email at dmitriy@losangelescpa.org.