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| a few requirements and restrictions, basically this act allows you to exclude much, if not all, of the mortgage debt cancellation. Remember, debt cancellation is usually includable in income for federal tax purposes and for California tax purposes too. California conforms to federal tax law to a certain extent. After January 1, 2014, you are not allowed by California to exclude the cancelation of debt for your principal home. Therefore, once you complete your federal tax return and exercise your legal right under the Mortgage Debt Relief Act of 2007 to exclude your mortgage debt on your main home, you need to reverse this exclusion from your California tax return. Enter the exclusion amount from your federal tax return on your California Schedule CA of Form 540 or Form 540NR, line 21f, column C. |
| Federal subsidies for prescription drug plans |
| If you have excluded any federal subsidies for prescription drug plan from your federal tax return, you need to reverse the exclusion for California tax purposes. California does not conform to federal tax law for this provision. Therefore, enter any amounts excluded for federal tax law on Schedule CA of Form 540 or Form 540NR, line 21f, column C. |
| American Indians per capita payments |
| The Per Capita Act and the Indian Tribal Judgement Funds Use or Distribution Act allow for Indian tribes to make payments to Indian tribe members. There are regulations in place that state that interest and investment income from the funds while held in a trust will not be subject to federal taxation. These regulations also state that per capital distributions from tribal trusts are to be excluded from taxation. However, if per capita payments that do not meet certain requirements and are made from an Indian tribe’s private bank account are taxable to the Indian tribe member receiving the per capita payments. The state of California does not agree on taxing Indian tribe members who live in Indian tribes that are affiliated with their tribe which are sourced from the same Indian tribe in which they are a member. In addition, California does not tax per capita payments received by a nonresident of California. On the other hand, if the Indian tribe member resides outside their affiliated reservation, California will tax those per capita benefits received by the tribal member who is residing outside their tribal country. Whatever amounts that are included in your federal tax reports and which are excludable for California must be entered on Schedule CA, line 21f, column B to exclude them from California taxable income. Calculations must be figure out carefully and care must be exercised as to the source of the tribal payments and also take into consideration where the tribal member resides. |
| Educator expenses |
| Some schools are not able to fully provide teachers with the proper teaching supplies such as paper, chalk, or whiteboard markers. The educator is left with having to pay for these supplies out of his or her own pocket. For federal tax purposes, you can deduct up to $250 of any unreimbursed expenses for books, supplies, and other items such as equipment that needs to be used in the classroom. The expenses are qualified expenses only if they are necessary for you to perform your work as an eligible educator. Only expenses that are incurred in the tax year are deductible. Not for California though. California does not conform to the federal deduction for educator expenses. Enter any educator credit amount on your California Schedule CA, line 23, column B to put it back in the gross income total. |
| Self-employed health insurance deduction |
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Self-employed individuals usually have to get their health insurance coverage. Many jobs offer health insurance coverage and many job acceptance decisions are based on whether the employer offers health insurance or not. |
| Copyright © 2014 [Hera's Income Tax School]. All Annual Federal Tax Refresher Course rights reserved. |
| Revised: 07/09/15 |
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