As California ushers in 2025, several new laws are set to take effect, bringing significant changes that could directly affect your tax planning and financial strategies. These updates span various sectors, from labor protections and medical coverage to financial transparency and business regulations. Here’s an overview of key legislative changes to help you stay ahead in your tax planning.
1. Elimination of Certain Bank Fees
Starting January 1, 2025, California’s Assembly Bill (AB) 2017 will prevent state-chartered banks and credit unions from charging fees for declined ATM withdrawals due to insufficient funds. This is a part of a broader effort to reduce unnecessary penalties for consumers.
– Tax Planning Impact: The reduction in banking fees may lower certain personal or business-related deductions. This serves as a reminder to assess other areas of tax planning where savings or reduced deductions might apply.
2. Expansion of Paid Family Leave
Beginning January 1, 2025, AB 2123 ensures employees can no longer be required to use accrued vacation time before accessing Paid Family Leave (PFL). This will have significant implications for workers taking time off for family emergencies.
– Impact on Individuals: Benefits from California’s Paid Family Leave may be taxable. Consider setting aside funds for potential tax liabilities and adjusting your withholding or estimated payments.
– Impact on Employers: Business owners must adjust their policies and payroll processes to accommodate the new rules. This could affect labor costs and employee benefits, necessitating a review of your tax strategy to stay compliant.
3. Freelancer Payment Protections
Effective January 1, under SB 988 (Freelance Worker Protection Act), companies must pay independent contractors on the date specified in their contract or within 30 days if no specific date is provided.
– Impact on Freelancers: This law could improve cash flow for freelancers, helping them manage quarterly tax payments more effectively. Timely payments also make it easier to track income and expenses for accurate tax reporting.
– Impact on Businesses: Businesses working with freelancers should review contracts and payment processes to ensure timely compliance with the new law, helping avoid unnecessary penalties or disputes.
4. Medical Debt Removal from Credit Reports
SB 1061, effective January 1, mandates the removal of medical debt from credit reports in California, preventing it from negatively impacting consumers’ credit scores.
– Tax Planning Impact: Although medical debts no longer affect credit reports, better credit scores can provide access to tax-advantaged financing options, including lower rates on home and business loans.
5. Simplified Subscription Cancellations
Starting July 1, AB 2863 mandates that companies must offer consumers the same method for canceling subscriptions as they do for signing up.
– Impact on Individuals: Easier subscription cancellations could help reduce unnecessary recurring expenses. Reassess your personal or business subscriptions and adjust deductible expenses accordingly.
– Impact on Business Owners: Businesses offering automatic subscription renewals should ensure compliance with the new law. Streamlined cancellation processes might reduce revenue from overlooked subscriptions, so it’s important to adjust your financial planning and tax strategy.
6. Fertility Treatment Insurance Coverage
Effective July 1, 2025, SB 729 requires large group health plans (those covering 100 or more employees) to include coverage for fertility treatments, including in-vitro fertilization (IVF).
– Tax Planning Impact: While fertility treatments can be costly, expanded coverage may reduce out-of-pocket expenses. Any remaining costs may still be deductible if they exceed the AGI threshold, so consider these expenses in your upcoming tax planning discussions.
7. Wildfire Sick Leave Protections for Agricultural Workers
Under SB-1105, farmworkers are now eligible to use sick leave during emergencies like wildfires, smoke exposure, heat, or flooding. This provision is effective January 1, 2025.
– Impact on Agricultural Businesses: Increased labor costs due to the expanded sick leave may be deductible. It’s important to track these expenses, as they could affect your business’s tax strategy during emergencies.
8. Child Influencer Protection Laws
New laws (SB 764 and AB 1880) that took effect January 1, require that a portion of child influencers’ earnings be placed in trust accounts to safeguard their financial interests.
– Impact on Parents: Parents of child influencers need to ensure proper tax reporting for trust-held income, as there are specific tax implications for income held in trust.
– Impact on Businesses: If your business works with or employs child influencers, ensure compliance with these new laws. This may include proper contract documentation and managing the trust fund requirements.
9. Ban on Legacy and Donor Preferences for University Admissions
As of September 1, 2025, AB 1780 bans colleges and universities from granting admission based on family wealth or donations, aiming to make the admissions process more equitable.
– Impact on Families: Families who previously made donations to influence college admissions may need to reconsider their charitable giving strategies. Contributions can still provide tax benefits, so structuring donations carefully remains important.
10. Food Delivery Fee Transparency
Effective January 1, SB 1490 requires food delivery platforms like DoorDash, GrubHub, and Uber Eats to provide itemized fee breakdowns and allows restaurants to opt out of these platforms.
– Impact on Restaurants and Contractors: These changes could alter how food businesses report revenue and track deductible expenses related to delivery fees. For independent contractors, understanding these fee structures may help more accurately track and report business expenses.
Preparing for 2025 and Beyond
These 10 new laws are designed to enhance financial transparency and fairness but also have the potential to impact your tax strategy. Whether you are adjusting to expanded insurance coverage, navigating new protections for freelancers, or reevaluating charitable contributions, it’s essential to understand how these laws will affect your financial planning.
If you’re unsure about how these laws might influence your tax position, it’s advisable to schedule a consultation with a tax professional to optimize your tax strategy for 2025 and beyond. With proper planning, you can navigate these changes effectively and ensure compliance while minimizing your tax liabilities.