All the income that is entered on your federal return is carried to your California return. However, California taxes certain items of income that are not taxed by the federal government. Below is a list of income that should be entered on your CA return:
Federal NOL Enter the amount of Federal NOL (Net Operating Loss) included on your Federal Return (Form 1040, line 21) as Addition to Income.
Please click here for form FTB 3805V to calculate allowable California NOL and enter as Subtraction from Income. Enter the amount of Federal Foreign Earned Income or housing exclusion included on your Federal Return as Addition to Income.
Student Loans Discharged on Account of Death or Disability - California does not conform to federal law in regard to the exclusion from income of certain discharges of student loans due to death or total and permanent disability.
Qualified Equity Grants - California does not conform to federal law regarding the election to defer the recognition of income attributable to qualified stock.
Expanded Use of 529 Account Funds - California does not conform to federal law regarding the IRC Section 529 account funding for elementary and secondary education or to the maximum distribution amount.
California Achieving a Better Life Experience (ABLE) Program - California does not conform to federal law regarding the IRC Sections 529A and 529 to increase contribution limitation made by the designated beneficiary to ABLE accounts and to allow the rollover of 529 accounts to an ABLE account without penalty.
Olympic Medals and Prize Money - If you excluded the value of any award, medal, or prize money on your federal return you must add it back on your California return.
Parents’ Election to Report Child’s Interest and Dividends - California conforms to federal law for elections made by parents reporting their child’s interest and dividends. Parents may elect to report their child’s income on their California income tax return by completing form FTB 3803.
If the amount of your child’s income you are reporting on your California income tax return is different than the amount you reported on your federal income tax return, enter the difference on line 21f, column B or column C as required.
Federal Foreign Earned Income or Housing Exclusion – enter in the amount excluded from federal income as an addition to income.
Combat Zone Foreign Earned Income Exclusion - Enter the amount excluded from federal income as an addition.
Original Issue Discount (OID) for debt instruments issued in 1985 & 1986In the year of sale or disposal, you will need to know the difference between the amount reported on your federal return and amount reported for California purposes.
OID Holders: Enter the difference between the amount included in Federal Gross Income and the amount included for California purposes as Addition to Income.
OID Issuers: Enter the difference between the federal deductible amount and the California Deductible amount as a Subtraction to Income.
Foreign Income of NonResident Aliens
- Adjust federal income to reflect worldwide income computed under California Law.
- Enter losses from foreign sources as a Subtraction to Income
- Enter foreign source income as Addition to Income
Foreign Income If you excluded income exempted by U.S. tax treaties on your Federal Form 1040 (unless specifically exempt for state purposes), enter the excluded amount as Addition to Income.
Coverdell ESA Distributions – if you received a distribution from a Coverdell ESA enter the difference between the federal and the California taxable as a subtraction or as an addition if required.
For additional information regarding additions to income, please click here.