The state of California has made the following tax law changes for tax year 2020:
- California conforms to the following Tax Cuts and Jobs Act provisions for taxable years beginning on or after January 1, 2019:
- California Achieving a Better Life Experience Program
- Student loan discharged on account of death or disability
- Federal Deposit Insurance Corporation Premiums
- Excess employee compensation
- Excess business loss
- Like-Kind Exchanges: California conforms to the change under the TCJA for exchanges initiated after January 10, 2019. However, California's limitation applies to: A taxpayer who is a head of household, a surviving spouse, or spouse filing a joint return with adjusted gross income (AGI) of
$500,000 or more for the taxable year in which the exchange begins; any other taxpayer filing an individual return with AGI of $250,000 or more for the taxable year in which the exchange begins.
- Young Child Tax Credit: The maximum amount of credit allowable for a qualified taxpayer is $1,000. The credit begins to phase out as earned income exceeds $25,000 and completely phases out at $30,000.
- Net Operating Loss Carrybacks beginning on or after January 1, 2019 are not allowed.
- Alimony: California law does not conform to changes made by the TCJA to federal law regarding alimony and separate maintenance payments.
- Small Business Accounting/Percentage of Completion Method: For taxable years beginning on or after January 1, 2019, California law generally conforms to the TCJA’s definition of small businesses as taxpayers whose average annual gross receipts over three years do not exceed $25 million.
- Student Loan Discharged Due to Closure of a For-Profit School: California law allows an income exclusion for an eligible individual who is granted a discharge of any student loan under specified conditions.
- Charitable Contribution and Business Expense Deduction Disallowance: For taxable years on or after January 1, 2014, California disallows a charitable contribution deduction to an educational organization that is a postsecondary institution or to the Key Worldwide Foundation and a deduction for a business expense related to a payment to the Edge College and Career network, LLC, to a taxpayer who meets specific conditions, including that they are named in any of several specified criminal complaints.
- Real Estate Withholding Statement: Effective January 1, 2020 the real estate withholding forms and instructions have been consolidated on one new Form 593, Real Estate Withholding Statement.