Adjustments on Federal Return not Recognized by CA

California does not recognize (allow) three adjustments (reductions of income) that are on Form 1040 Schedule 1. On CA Schedule CA, the changes are entered as subtractions from what is on Schedule 1; the net effect is to increase taxable income (California AGI). The three federal adjustments are:

  • Educator expenses (Form 1040, Schedule 1 Line 11) – discussed on page 67.
    • TaxSlayer automatically adjusts CA.  BUT, if the taxpayer wants to claim this amount on the CA return as unreimbursed employee expenses (a type of itemized expense subject to a 2%-of-AGI reduction on Schedule A), see the manual adjustment in section “ITEMIZED DEDUCTIONS TREATED DIFFERENTLY BY CA” below.
  • Health savings account deduction (Form 1040, Schedule 1 Line 13; HSA) – discussed on page 67 [these are employee contributions, which are not on Form W-2].
    • TaxSlayer automatically makes the adjustment.
  • IRA deductions (Form 1040, Schedule 1 Line 20) made after age 73 (previously was 70½), as discussed on page 70.  A manual adjustment (income addition) is required, discussed on page 103.

Adjustments on Federal Return Handled Differently by CA

California handles differently any alimony paid for divorces finalized after 2018, as well as separations signed after 2018. TaxSlayer adjusts these automatically.

  • See Schedule 1, Line 2 – Alimony Received, page 52.
  • See Schedule 1, Line 19 – Alimony Paid, page 70.

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