Adjustments on Federal Return not Recognized by CA

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

  • Educator expenses (Form 1040, Schedule 1 Line 11) – discussed on page 71.
    • TaxSlayer automatically makes the basic adjustment on the CA return.
      • However, 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), it’s a manual adjustment – see the “ITEMIZED DEDUCTIONS TREATED DIFFERENTLY BY CA” section below.
  • Health savings account deduction (Form 1040, Schedule 1 Line 13; HSA) – discussed on page 71 [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 74. A manual adjustment (income addition) is required, as discussed on page 108.

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 handles these adjustments automatically.

  • On the federal return, such alimony is not treated as income to the recipient, nor can the paying taxpayer take the alimony amount as an adjustment on Schedule 1 Line 19a.
  • On the California return, all alimony paid, regardless of date of divorce or separation, is income to the recipient and is an allowable adjustment for the payer. TaxSlayer automatically makes any post-2018 adjustment:
    • Alimony paid is entered on CA Schedule CA Part I, Section C line 19a, which reduces CA income.
    • Alimony received is entered on CA Schedule CA Part I, Section B line 2a, which increases CA income.

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