California Tax Updates 2025: What Los Angeles Business Owners Need to Know
Running a business in Los Angeles is exciting, but staying on top of California’s tax laws can feel overwhelming. In 2025, new state and federal changes are creating both risks and opportunities for business owners and professionals. The good news? With the right strategy, you can lower your tax burden, avoid penalties, and plan smarter for growth.
Here’s what every California business owner should keep an eye on this year.
1. Tax Extension Deadline: October 15, 2025
If you filed a tax extension back in April, the final deadline to submit your 2024 returns is October 15, 2025.
Miss this date, and penalties can stack up quickly.
Extensions give you more time to file, not to pay. Any unpaid balance from April is already accruing interest.
Tip from Virtual CPAs: Don’t wait until October. We recommend reviewing your books now so you have time to strategize deductions and avoid last-minute surprises.
2. Business Tax Changes in California
California has introduced updates that directly impact small businesses:
Apportionment Rule Shift: Companies with sales in multiple states (common for e-commerce, real estate, and service firms) will now calculate California taxable income using only sales sourced to California. This can increase liability for out-of-state sellers.
Net Operating Loss (NOL) Limitations: High-income businesses face suspensions or limits on NOL carryforwards in 2025. That means if you had a bad year before, you may not be able to offset as much of your current income.
Tip from Virtual CPAs: If your business operates across state lines or relies on NOLs, it’s worth a planning session now — before year-end — to see how this affects your tax bill.
3. Federal & California Alignment
California is moving closer to aligning with many federal tax laws. This means:
Retirement Contributions: Catch-up contributions and higher SIMPLE IRA limits are now more closely aligned with federal rules.
Alimony: Like federal law, California will no longer allow alimony payments as deductions for agreements signed after 2019.
Tip from Virtual CPAs: If you’re maximizing retirement savings, we can help you calculate the right amount to contribute under the new limits, it’s a smart way to reduce taxable income.
4. Penalties & Compliance
Both the IRS and California Franchise Tax Board have rolled out stricter penalty structures for late or incorrect filings. Small mistakes, missing a filing, miscalculating sales tax, or forgetting to remit payroll taxes can lead to costly fines.
Tip from Virtual CPAs: Automating your bookkeeping and payroll reduces errors. We offer cloud-based accounting systems so you always know where you stand.
5. Big Opportunities for Small Business Owners
Despite the new rules, 2025 also offers planning opportunities:
Section 179 Deduction: You may be able to write off equipment or software purchased before Dec 31.
Year-End Tax Planning: Strategic moves like prepaying certain expenses or timing income can help lower your 2025 liability.
Advisory Beyond Compliance: CPAs can now help with business forecasting, cash flow modeling, and even growth planning, not just taxes.
Los Angeles business owners face more complexity in 2025, but also more chances to save. With October deadlines looming and new California rules in play, the best step you can take is proactive planning.
At The Virtual CPAs, we simplify your finances so you can focus on running and growing your business.
Ready to get started?