Instructions For Schedule Ca (540) - California Adjustments - Residents

Part II Adjustments to Federal Itemized Deductions

Gambling Losses – California lottery losses are not deductible for California.

Enter the amount of California lottery losses shown on federal Schedule A

Line 38 – Federal Itemized Deductions

(Form 1040) as a negative number on line 41.

Enter the total amount of itemized deductions from your federal Schedule A

Federal Estate Tax – Federal estate tax paid on income in respect of a

(Form 1040), Itemized Deductions, lines 4, 9, 15, 19, 20, 27, and 28.

decedent is not deductible for California. Enter the amount of federal estate

Important: If you did not itemize deductions on your federal tax return but

tax shown on federal Schedule A (Form 1040) as a negative number on

will itemize deductions on your California tax return, first complete and attach

line 41.

federal Schedule A (Form 1040). Then complete Schedule CA (540), Part II,

Generation Skipping Transfer Tax – Tax paid on generation skipping transfers

line 38 through line 44.

is not deductible under California law. Enter the amount of expenses shown

Line 39 – State, Local, and Foreign Income Taxes; General Sales Tax

on federal Schedule A (Form 1040) as a negative number on line 41.

Add the following amounts from federal Schedule A (Form 1040) and enter

State Legislator’s Travel Expenses – Under California law, deductible travel

on line 39:

expenses for state legislators include only those incurred while away from

• Line 5, state and local income tax (including limited partnership tax

their place of residence overnight. Figure the difference between the amount

and income or franchise tax paid by corporations), and State Disability

allowed using federal law and the amount allowed using California law. Enter

Insurance (SDI) or state and local general sales tax.

the difference as a negative number on line 41.

• Line 8, foreign income taxes.

Qualified Charitable Contributions – Your California deduction may be

Line 41 – Other Adjustments

different from your federal deduction. California limits the amount of your

deduction to 50% of your federal adjusted gross income. Figure the difference

Medical and Dental Expense Deduction – Federal has changed the allowable

between the amount allowed using federal law and the amount allowed using

medical and dental expense deduction amount. For federal purposes, a

California law. Enter the difference as a negative number on line 41.

deduction is allowed for unreimbursed allowable medical and dental expenses

that exceeds 10% of federal AGI. California allows a deduction for medical

Charitable Contribution Carryover Deduction – If deducting a prior year

and dental expenses that exceed 7.5% of federal AGI. To determine the

charitable contribution carryover, and the California carryover is larger than

amount of the itemized deduction adjustment:

the federal carryover, enter the additional amount as a positive number on

line 41.

• Calculate the medical and dental expense deduction for California.

• Calculate the medical and dental expense deduction for federal.

Health Savings Account (HSA) Distributions – If you received a tax-free HSA

• Subtract the federal amount from the California amount. Enter the amount

distribution for qualified medical expenses, enter the qualified expenses paid

on line 41, as a positive number.

that exceed 7.5% of federal AGI as an adjustment to itemized deductions. To

determine the amount of the itemized deduction adjustment:

Adoption-Related Expenses – If you deducted adoption-related expenses

on your federal Schedule A (Form 1040) and are claiming the adoption cost

• Calculate the medical expense deduction for California.

credit for the same amounts on your Form 540, enter the amount of the

• Calculate the medical expense deduction for federal.

adoption cost credit claimed as a negative number on line 41.

• Subtract the federal amount from the California amount. Enter the amount

on line 41, as a positive amount.

Mortgage Interest Credit – If you reduced your federal mortgage interest

deduction by the amount of your mortgage interest credit (from federal

Carryover Deduction of Appreciated Stock Contributed to a Private

Form 8396, Mortgage Interest Credit), increase your California itemized

Foundation prior to January 1, 2002 – If deducting a charitable contribution

deductions by the same amount. Enter the amount of your federal mortgage

carryover of appreciated stock donated to a private operating foundation prior

interest credit as a positive number on line 41.

to January 1, 2002, and the fair market value allowed for federal purposes is

larger than the basis allowed for California purposes, enter the difference as a

Nontaxable Income Expenses – If, on federal Schedule A (Form 1040), you

negative number on line 41.

claim expenses related to producing income taxed under federal law but not

taxed by California, enter the amount as a negative number on line 41.

Interest on Loans from Utility Companies – Taxpayers are allowed a tax

deduction for interest paid or incurred on a public utility company financed

You may claim expenses related to producing income taxed by California law

loan that is used to purchase and install energy efficient equipment or

but not taxed under federal law by entering the amount as a positive number

products, including zone-heating products for a qualified residence located

on line 41.

in California. Federal law has no equivalent deduction. Enter the amount as a

Employee Business Expense – If you completed federal Form 2106 or

positive number on line 41.

Form 2106-EZ, prepare a second set of forms reflecting your employee

Private Mortgage Insurance (PMI) – If you took the deduction on federal

business expense using California amounts (i.e., following California law).

Schedule A (Form 1040), line 13, then subtract the same amount on line 41.

Generally, California law conforms with federal law and no adjustment is

Claim of Right – If you had to repay an amount that you included in your

needed. However, differences occur when:

income in an earlier year, because at the time you thought you had an

• Assets (requiring depreciation) were placed in service before January 1,

unrestricted right to it, you may be able to deduct the amount repaid from

1987. Figure the depreciation based on California law.

your income for the year in which you repaid it. Or, if the amount you repaid

• Federal employees were on temporary duty status. California does not

is more than $3,000, you may take a credit against your tax for the year in

conform to the federal provision that expanded temporary duties to

which you repaid it, whichever results in the least tax.

include prosecution duties, in addition to investigative duties. Therefore,

If the amount repaid was not taxed by California, then no deduction or credit

travel expenses paid or incurred in connection with temporary duty

is allowed.

status (exceeding one year), involving the prosecution (or support of the

prosecution) of a federal crime, should not be included in the California

If you claimed a credit for the repayment on your federal tax return and are

amount.

deducting the repayment for California, enter the allowable deduction as a

Compare federal Form 2106, line 10 or Form 2106-EZ, line 6 and the form

positive amount on Schedule CA (540), line 41. Deductions of $3,000 or less

are subject to the 2% federal AGI limit.

completed using California amounts. If the federal amount is larger, enter the

difference as a negative number on line 41. If the California amount is larger,

If you deducted the repayment on your federal tax return and are taking a

enter the difference as a positive number on line 41.

credit for California, enter the amount of the federal deduction as a negative

Investment Interest Expense – Your California deduction for investment

amount on Schedule CA (540), line 41. To help you determine whether to take

interest expense may be different from your federal deduction. Use form

a credit or deduction, see the Repayment section of federal Publication 525,

FTB 3526, Investment Interest Expense Deduction, to figure the amount to

Taxable and Nontaxable Income. Remember to use the California tax rate in

enter on line 41.

your computations. If you choose to take the credit instead of the deduction

for California, add the credit amount on line 75, the total payment line, of the

Form 540. To the left of the total, write “IRC 1341” and the amount of the

credit.

Page 6 Schedule CA (540) Instructions 2013

Instructions For Schedule Ca (540) - California Adjustments - Residents - 2013 Page 6

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