Tax Credits & Deductions
Tax Credits & Deductions
The One Big Beautiful Bill Act (OBBBA) introduced significant new tax breaks for this filing season. Check if you qualify for these new deductions.
SALT Cap Increase: The limit on deducting State and Local Taxes (SALT) has increased from $10,000 to $40,000for eligible taxpayers. (This is huge for California homeowners!)
Auto Loan Interest Deduction: You may now be able to deduct interest paid on car loans (subject to income limits).
Tips Deduction: A new "above-the-line" deduction for qualified tip income (up to $25,000).
Overtime Pay Deduction: A temporary deduction for qualified overtime compensation.
Senior Citizen "Bonus" Deduction: An additional standard deduction of $6,000 for single filers ($12,000 for couples) aged 65 and older.
Non-Itemizer Charitable Deduction: Even if you take the Standard Deduction, you can now deduct up to $1,000(Single) or $2,000 (Joint) for cash donations to charity.
Federal Tax Credits (Dollar-for-Dollar Savings)
Child Tax Credit (CTC): Expanded under OBBBA to $2,200 per qualifying child (under age 17).
Earned Income Tax Credit (EITC): Refundable credit for low-to-moderate income workers.
Child & Dependent Care Credit: For daycare, day camps, and care costs that allow you to work.
Residential Clean Energy Credit: 30% credit for solar, wind, and battery storage installation.
American Opportunity & Lifetime Learning Credits: For higher education tuition and expenses.
Federal Tax Deductions (Reduces Taxable Income)
Standard Deduction: Increased for 2025 (approx. $15,750 for Single / $31,500 for Joint).
Student Loan Interest: Deduct up to $2,500 of interest paid.
Educator Expenses: Deduct up to $300 for classroom supplies.
HSA Contributions: 100% tax-deductible contributions to Health Savings Accounts.
Mortgage Interest: Deductible on up to $750,000 of home debt.
Important: California typically does not automatically conform to all new federal OBBBA laws (like the tips or auto loan deductions). We will review your specific situation to see what applies to your state return.
CalEITC (California Earned Income Tax Credit): A refundable cashback credit for low-income Californians.
Young Child Tax Credit (YCTC): Extra credit for CalEITC-eligible families with a child under 6.
Foster Youth Tax Credit (FYTC): Up to $1,117 refundable credit for current/former foster youth (ages 18-25).
Renter’s Credit: Nonrefundable credit for residents who rented for at least half the year.
PTE Elective Tax Credit: For business owners who paid the Pass-Through Entity tax (bypassing the federal SALT cap).
California "Exclusions":
Social Security: 100% Tax-Free in CA.
Unemployment Benefits: 100% Tax-Free in CA.
Paid Family Leave (PFL): Generally Tax-Free in CA.
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