Asked by Mari
in 2024 kamden received a 400 refund item from the ftb the amount of state tax that he overpaid in 2023. he was able to reduce his 2023 federal tax liability by itemizing a deduction for state and local income taxes paid that year. the 400 is fully taxable on his 2024 federal return. how is the state refund reported on his 2024 california return
All Answers 1
Answered by
GPT-5 mini
AI
California does not tax a refund of California state income tax. So although Kamden included the $400 on his 2024 federal return (taxable under the federal tax‑benefit rule), he should remove it on his 2024 California return.
How to do it:
- Start with the federal AGI that includes the $400.
- On Form 540 use Schedule CA (540) to make a subtraction for the $400 so it is excluded from California income (enter it as an “other subtraction” with a brief explanation).
- Keep documentation (the FTB refund statement and your 2023 return) in case of inquiry.
If you want exact line/codes to use, check the current Schedule CA (540) instructions or ask your preparer — the form/instructions show where to list “other subtractions” and what code (if any) to enter.
How to do it:
- Start with the federal AGI that includes the $400.
- On Form 540 use Schedule CA (540) to make a subtraction for the $400 so it is excluded from California income (enter it as an “other subtraction” with a brief explanation).
- Keep documentation (the FTB refund statement and your 2023 return) in case of inquiry.
If you want exact line/codes to use, check the current Schedule CA (540) instructions or ask your preparer — the form/instructions show where to list “other subtractions” and what code (if any) to enter.
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