As we head into the holiday season, now is the time to take control of your 2025 tax strategy. With new tax laws under the One Big Beautiful Bill Act (OBBBA) and the temporary SALT deduction increase, California taxpayers have powerful opportunities to reduce taxable income and improve financial outcomes.

At TaxPlus, we help individuals and businesses across Los Angeles and San Diego make smart, proactive tax moves before year-end.

What’s New for 2025: Higher SALT Deductions and Expanded Tax Breaks

The SALT (State and Local Tax) deduction cap has been temporarily raised from $10,000 to $40,000 through 2029, providing a significant benefit to residents in high-tax states like California, New York, and New Jersey.

If your Modified Adjusted Gross Income (MAGI) is $500,000 or below ($250,000 if filing separately), you can claim the full $40,000 deduction. Above that, the benefit phases out until it reverts to $10,000 at MAGI levels of $600,000 or more.

Tip: If you expect to benefit from itemizing under the new limits, track your property taxes, charitable donations, and mortgage interest closely. Adjusting your withholdings may also increase your take-home pay between now and 2029.

New Above-the-Line Deductions Under OBBBA

OBBBA introduces additional deductions that apply in addition to your standard or itemized deduction — meaning these can directly reduce your taxable income.

1. No Tax on Overtime Income (2025–2028)

Taxpayers can now deduct up to $12,500 of overtime income ($25,000 for married joint filers) each year.

Requirements:

• MAGI under $150,000 ($300,000 for joint filers)

• Only the overtime premium portion (the extra above your normal hourly rate) is deductible.

• Proof of overtime pay required.

Example: If your base rate is $40/hour and you earn $60/hour for overtime, the $20/hour premium qualifies for this deduction.

2. Tax Deduction for Car Loan Interest (2025–2028)

Another new above-the-line deduction allows qualifying taxpayers to deduct up to $10,000 in car loan interest per year.

Eligibility:

• New vehicle purchased during the tax year for personal use

• Final assembly must be in the U.S.

• Vehicle weighs under 14,000 lbs

• MAGI under $100,000 ($200,000 joint)

This deduction can be especially useful for California taxpayers purchasing new vehicles assembled domestically.

Charitable Contribution Tracking

Because the higher SALT cap will push more Californians into itemizing, now is the time to track all charitable giving — both cash donations and non-cash contributions like clothing or furniture. These deductions directly reduce taxable income.

Lowering Your MAGI with an S-Corp or Side Business

If your income levels limit your ability to claim the full SALT deduction, one effective strategy is to reduce your MAGI through legitimate business deductions.

Forming a side business or S-Corporation can:

• Capture deductible business expenses

• Offset W-2 income

• Lower taxable income

• Protect personal assets

• Reduce self-employment taxes once profitable

S-Corp Formation Deadline: November 30, 2025
Set up your entity by this date to allow time for IRS acceptance.

Our tax professionals can help you determine whether an S-Corp, LLC, or sole proprietorship is the right choice for your situation.

Higher 2025 Standard Deductions & Senior Bonus

Even if you don’t itemize, you’ll still benefit from increased standard deductions:

• Married filing jointly: $31,500 (+$2,300 from 2024)

• Single / Married filing separately: $15,750 (+$1,150)

• Head of household: $23,625 (+$1,725)

• Additional: $2,000 for taxpayers aged 65+ or blind

Under OBBBA, qualifying seniors also receive a “Senior Bonus” deduction of up to $6,000 per person ($12,000 for couples) from 2025–2028.

Eligibility:

• Age 65+ by year-end

• MAGI ≤ $75,000 (single) / ≤ $150,000 (joint) for full deduction

• Deduction phases out at higher income levels

Additional OBBBA Updates to Know

• ❌ EV Tax Credit Repealed: Ended September 30, 2025 (used EV credit remains until June 2026).

• Residential Energy Credit Ends: December 31, 2025.

• ⚙️ Bonus Depreciation Restored: 100% deduction for qualifying business assets placed in service after January 19, 2025.

• Child Tax Credit Increased: $2,200 per child for 2025, adjusted for inflation post-2026.

• Qualified Tips Deduction: Up to $25,000 (joint filers) for eligible workers.

Maximize Retirement & Investment Deductions

1. Contribute to Retirement Plans

Maxing out retirement contributions lowers MAGI and increases long-term savings.

• Employer-sponsored and business retirement plans: Contribute by December 31, 2025

• IRAs and SEP IRAs: Contributions accepted until April 15, 2026 for 2025 deductions

If you own a side business, you may qualify for an additional deductible retirement plan.

2. Offset Capital Gains with Loss Harvesting

Review your investment portfolio for gains and losses. Selling underperforming assets can offset realized gains and reduce taxable income. Contact TaxPlus for guidance on IRS rules for capital loss harvesting.

2025 Year-End Deductions for Business Owners

✅ Prepay Qualifying Expenses: Deduct up to 12 months of future rent, insurance, or lease payments (cash-basis taxpayers only).
✅ Defer Income: Delay billing until January 2026 to shift income to next year.
✅ Purchase Equipment: Deduct 100% of qualified business assets under the restored bonus depreciation rule.
✅ Improve Commercial Property: Deduct interior improvements placed in service by December 31, 2025.

Schedule Your 2025 Tax Planning Conference

The TaxPlus team is available this fall for in-person or virtual appointments. Whether you’re planning for your household, side business, or corporation, we can help you reduce your tax liability and maximize deductions before December 31.

Los Angeles Office
May – JTH@taxplus.com | 310-398-3231

San Diego Office
Henna – Henna@taxplus.com | 858-279-1640

We’re available in person, by phone, or via video conference.
Let’s make your 2025 tax season more rewarding — and less stressful.