Most income entered on your federal return automatically carries to your California return. However, California does not conform to certain federal tax laws. If you claimed a federal exclusion, deduction, or other tax benefit that California does not recognize, you may need to add that amount back to your California income.
Federal Net Operating Loss (NOL)
If a federal Net Operating Loss (NOL) is included on your federal return, enter that amount as an addition to income. California has separate rules for calculating and claiming NOL deductions.
Please click here for Form FTB 3805V to calculate your allowable California NOL. Any allowable California NOL should be entered as a Subtraction from Income.
Foreign Earned Income or Housing Exclusion
If you excluded foreign earned income or housing expenses on your federal return, enter the excluded amount as an addition to income for California purposes.
Combat Zone Foreign Earned Income Exclusion
If you excluded combat zone foreign earned income on your federal return, enter the excluded amount as an addition to income on your California return.
Qualified Equity Grants
California does not conform to the federal election that allows certain employees to defer income from qualified stock. If you used this federal election, you may need to add the deferred income to your California return.
529 Plan Distributions
California does not conform to certain federal rules that expanded the use of Section 529 account funds for elementary and secondary education expenses. A California adjustment may be required.
California ABLE Program Adjustments
California does not conform to certain federal provisions involving additional contributions to ABLE accounts and rollovers from 529 plans to ABLE accounts.
Olympic and Paralympic Awards
If you excluded the value of Olympic or Paralympic medals or related prize money on your federal return, include that amount as an addition to income for California purposes.
Parents' Election to Report a Child's Income
California generally follows the federal election that allows a parent to report a child's interest and dividend income on the parent's return. If the amount reported for California differs from the amount reported federally, enter the difference as required.
Crime Hotline Rewards
Enter any reward received from a government-authorized crime hotline as an addition to income.
Beverage Container Recycling Income
Enter taxable beverage container recycling income as an addition to income.
Original Issue Discount (OID)
For certain debt instruments issued in 1985 or 1986, California and federal rules may require different OID calculations. Enter the difference between the federal and California amounts, if applicable.
Foreign Income
If you excluded income on your federal return under a U.S. tax treaty and the income is not exempt for California purposes, enter the excluded amount as an addition to income.
Foreign Income of Nonresident Aliens
California may require adjustments to reflect worldwide income under California law. Foreign source income may need to be added to income, while certain foreign source losses may qualify as a subtraction.
Coverdell Education Savings Account (ESA) Distributions
If you received a Coverdell ESA distribution and the taxable amount for California differs from the federal amount, enter the difference as an addition or subtraction, as applicable.
How California Reports Income Adjustments
When there are differences between your federal and California income, California generally requires those adjustments to be reported on Schedule CA (540), California Adjustments – Residents. Additions increase California income, while subtractions reduce California income.
Program Entry
To add any of the items above to your California return, go to:
- State
- Edit California using the three dots
- Additions to Income
Additional Information
Only enter additions that apply to your specific tax situation. If California and federal tax treatment are the same for an item, no adjustment is needed. Review your tax documents carefully to determine whether California requires an addition to income.