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New State Exclusion for CA Military Retirees | OBBB Act: 2025 Changes | OBBB Act: Changes Starting in 2026 | Phase-Out of Paper Checks | Tax Returns on Rental Properties

Stay on top of the latest tax-law changes. Don’t see something that you have questions about? Feel free to contact us today.

Starting January 1, 2025, California military retirees and surviving spouses are now able to exclude up to $20,000 of military retirement income from California state tax. Income limits do apply.

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In 2025, Congress passed the OBBB Act, which made major changes that took effect. Here are some to look out for: 

Energy Efficiency Credits
As of December 31, 2025, the residential energy efficiency tax credits have been eliminated. Going forward, purchases will no longer qualify for these credits.

SALT Deduction Increased
The deduction cap on state and local taxes (SALT) for itemizers has been raised from $10,000 to $40,000 for single and joint filers, $20,000 for married couples filing separately. Income limits still apply. This increase is active through 2029 if not renewed. 

Additional Standard Deduction for Seniors
Senior citizens received another deduction increase on top of the additional deduction they already qualify for. 

New Above-the-Line Deductions
Three new above-the-line deductions were introduced, meaning you do not need to itemize to claim them. Income limits still apply to these new deductions:

Interest Paid on a Qualified Car Loan
The vehicle must have its final assembly done in the US and not have been previously owned by anyone else; the deduction limit is $10,000.

Qualified Tip Income
$25,000 deduction limit

Qualified Overtime Pay
Deduction limit $12,500 single / $25,000 joint

Business Deductions
Several business deductions were expanded or brought back under the OBBB Act. Check with your tax preparer to ensure you’re making full use of the changes.

Trump Accounts for Children
A new federally sponsored savings account is available for children born in 2025 and later. The government will seed eligible accounts with an initial deposit.

Expanded Health Savings Account Uses
The list of qualified expenses you can pay with HSA funds has been extended, covering categories it previously did not.

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OBBB Act provisions starting in 2026:

New Charitable Deduction Rules
Both itemizers and non-itemizers will have updated rules for deducting charitable contributions.

529 Plan K-12 Distribution Increase
The annual K–12 distribution limit, previously capped at $10,000, has been raised to $20,000 per beneficiary.

View all blog posts on OBBB Act updates.

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The federal government has begun phasing out paper checks for tax refunds and is moving away from accepting paper checks for owed taxes. The IRS stated that refunds may be delayed if your direct deposit is not yet set up. To avoid future complications, we advise you to:

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Starting January 1, 2024, short-term rental (STR) owners may be required to file an annual BOE 571-STR Business Personal Property Tax Return in the county where the rental is located. This is a county-level requirement, so the rules vary by location.

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Have questions? Contact us today.