California’s tax code has officially caught up with the federal government. With the enactment of Senate Bill 711 (SB 711), the state’s tax rules now align with the 2025 Internal Revenue Code (IRC), affecting both individual and business taxpayers as the 2025 filing season approaches.
The update represents the first comprehensive alignment in over a decade, replacing the previous conformity date of 2015. State officials say the change reduces longstanding discrepancies between California and federal returns, providing clarity for millions of taxpayers.
Bringing California Tax Law Up to Date
SB 711 updates California’s “specified date” for conformity with federal tax law to January 1, 2025. The law adopts most federal changes enacted over the past decade, including modifications to income recognition, deductions, and tax credits.
For individuals, this update affects standard deductions, retirement accounts, and certain federal credits now recognized at the state level. Corporations and partnerships may see changes in reporting requirements, including updated rules for depreciation and business tax credits.
While the bill aligns California with federal standards, the state continues to decouple from selected federal provisions, maintaining California-specific rules where legislators deemed necessary.
Implications for Individuals and Businesses
Taxpayers preparing 2025 returns will need to account for the updated conformity date. Individuals with investments, retirement accounts, or itemized deductions may notice adjustments in taxable income. For business taxpayers, especially corporations and partnerships, careful review is essential to ensure compliance with new reporting requirements.
Small business owners and self-employed taxpayers should particularly evaluate year-end financial decisions. Adjustments to deductions or income recognition could affect estimated tax payments and overall liability. Experts advise that early review can prevent costly errors when returns are filed next year.
Relevance for Year-End Planning
As of December 2025, SB 711 is already in effect, making it a critical consideration for year-end tax strategies. Decisions such as retirement contributions, charitable donations, and business investments now carry implications under the updated rules.
Tax professionals note that the alignment with federal law simplifies the filing process for those submitting both federal and state returns, though selective decoupling still requires attention. Errors could arise if taxpayers assume federal rules apply automatically in California.
Professional Guidance Recommended
California’s Franchise Tax Board (FTB) has issued preliminary guidance to assist taxpayers in understanding SB 711. Individuals and businesses are encouraged to:
- Review the latest federal provisions now incorporated at the state level.
- Update accounting and reporting practices to reflect alignment.
- Seek professional advice for complex situations, including investments, self-employment income, and multi-state business operations.
Doing so can help ensure compliance with SB 711 while maximizing allowable deductions and credits, reducing the risk of filing errors, and preventing delays or penalties during the 2025–2026 filing season. It also positions taxpayers to take full advantage of the federal-state alignment created under SB 711, which may offer additional planning opportunities for individuals, entrepreneurs, and businesses navigating California’s updated tax landscape.
Looking Ahead
SB 711 represents a significant modernization of California tax law, closing a decade-long gap between state and federal rules. While the bill does not adopt every federal provision, it establishes a more predictable framework for taxpayers and simplifies filing for the vast majority of residents and businesses.
As California moves into 2026, SB 711 will continue shaping tax planning and year-end financial decisions. For taxpayers, understanding the nuances of state-federal conformity has never been more important.
Read more at the Franchise Tax Board – Tax News website.
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