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California Tax Topic 3 - California Tax Deductions
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Complete a Tax Return Use California 540/540A Booklet to complete this topic. You may also need to refer to IRS publications. Prepare a Federal Schedule A (Form 1040) return for Rodolfo Ramirez with the following deductible expenses.
Prepare a California Form 540 and Schedule CA return for Rodolfo Ramirez. Get all their basic information from the following W2, including income information.
They did not
itemize in 2007. Have your return prepared and ready to answer the questions.
1. Look at the Form 540 you prepared for Rodolfo and Anna Ramirez. What is the amount on Form 540, Line 18?
A.
$ 262. 2. Look at the Form 540 you prepared for Rodolfo and Anna Ramirez. What is the amount on Form 540, Line 66?
A.
$ 197. 3. For California, married or an RDP and filing separate returns, you and your spouse/RDP must either both itemize your deductions or both must take the standard deduction.
True False 4. For California, decide whether to itemize your charitable contributions, medical expenses, interest paid, taxes, etc., or take the standard deduction. Your California income tax will be less if you take
A.
Your California itemized deductions. 5. Lucy will itemize her deductions for tax year 2008. She was single for all of 2008. Her total adjusted gross income was $150,000. Her total federal itemized deductions were $11,978 of which are the following amounts from federal Schedule A: line 5: $668.00, line 6: $950, line 8: $500, and line 14: $9,860. What are her total itemize deductions allowed for California?
A.
$11,978. 6. Miriam and her husband decide to itemize in tax year 2008. Their total deductible itemized deductions totaled to $8,500. Their Federal standard deduction for MFJ is $10,900 but their California standard deduction is only $7,384. For them it is a better benefit to claim the standard deduction for federal and
A.
Due to the conflict, not do a return for California at all. 7. Jeff, 27, is a single man who earned $24,000 in tax year 2008. His itemize deductions amounts are the following: $346 in General sales tax calculation (based on his living LA county), $200 deductible DMV motor vehicle tax. He had a total of $5,654 in medical expenses and after the limit he can deduct only $3,854 in medical expenses. A total of $4,400 in itemize deductions. Jeff decides that its best for him to itemize his deductions on his California return but not on federal. What should he do?
A.
Complete a federal Schedule A to calculate the results to enter on his
Schedule CA (540). 8. If you did not itemize your deductions on your federal income tax return but will itemize your deductions for your California Form 540/540A, first complete a sample federal Schedule A.
True False 9. Toby, age 25, is a single man. He will itemize his deductions for tax year 2008. His total adjusted gross income was $199,000. He takes care of his nephew and provided all the support for him and meets all the tests to qualify for the head of household filing status. His total itemized deductions are $27,591. The following amounts are from federal Schedule A: line 5: $1,221.00, line 6: $950, line 8: $500, line 10: $10,000,line 13: $450, line 14: $10,450, line 19: $3,000, and line 26: $1,020. What are his total itemize deductions allowed for California?
A. $
27,591. 10. What is the California Standard deduction amount for a dependent who earned $4,000 from her job.
A.
$ 4,300.
Complete a Tax Return Complete a Schedule A for Mukesh (216-20-1334) and Sarita Bhargava (342-06-1213). Their property was exempt from property tax. Sarita did not work. They had the following medical expenses for the year:
Their W2 is included. Prepare a California Form 540 and Schedule CA for Mukesh Bhargava. Use the Schedule A that you filled out to complete the return.
11. Look at the Form 540 you prepared for Mukesh and Sarita. What is the amount on Form 540, Line 18?
A. $ 9,530. 12. Look at the Form 540 you prepared for Mukesh and Sarita. What is the amount on Form 540, Line 66?
A. $ 131. 13. For California, RDPs have the same legal benefits, protections, and responsibilities as married couples unless otherwise specified. True False 14. If you received a tax-free HSA distribution for qualified medical expenses, enter the qualified expenses paid that exceed 7.5% of federal AGI as an adjustment to your California itemized deductions. True False 15. If you receive a tax-free HSA distribution for qualified medical expenses, enter the qualified expense paid that exceed 7.5% of federal AGI as an adjustment to itemized deductions. To determine the amount of the California itemized deduction adjustment
A. Calculate the medical expense deduction for California. 16. Federal law allows a deduction for contributions to an HSA account. California conforms to this provision. True False
Complete a Tax ReturnComplete a Schedule A, Form 540 and Schedule CA. Use the following expenses:
John is not married and has no children or other dependents. Use W2's that are included; all information is current.
17. Look at the Form 540 you prepared for John Soler. What is the amount on Form 540, Line 18?
A.
$ 3,516. 18. Look at the Form 540 you prepared for John Soler. What is the amount on Form 540, Line 62?
A.
$ 430. 19. If you did not itemize deductions on your federal tax return but still itemize deductions on your California tax return, first complete federal Schedule A (Form 1040) and then complete Schedule CA (Form 540). True False 20. California taxes the state income tax refund received in 2008. True False 21. Enter on line 39 of Schedule CA (Form 540) state, local, foreign income taxes, and general sales tax. True False 22. FTB allows taxpayers to elect to claim either local general sales and use taxes or state and local income taxes as an itemized deduction. True False 23. FTB allows a deduction for foreign income taxes as an itemized deduction amount. True False 24. If you did not itemize deductions on your federal tax return, you cannot itemize deductions for California. True False 25. Federal estate tax paid on income in respect of decedent is not deductible for California. True False 26. Tax paid on generation skipping transfers is deductible under California law. True False Complete a Tax Return
Complete a Schedule A, Form 540 and Schedule CA for Maria Garcia (Age 24).
She also has the following payments in 2008.
Maria is not married and she has no children or other dependents. Maria paid her mortgage interest for her home to an individual (not to a bank):
Get all basic information from the following W2, including income information.
27. Look at the Form 540 you prepared for Maria. What is the amount on Form 540, Line 18?
A.
$ 11,217. 28. Look at the Form 540 you prepared for Maria. What is the amount on Form 540, Line 62?
A.
$ 90. 29. Your California deduction for investment interest may be different from your federal deduction. Use __________ to figure the amount to enter on line 41.
A.
FTB 3526. 30. Your California interest expense deduction may be different from your federal deduction. A deduction is allowed for interest paid on any loan or financed indebtedness from a utility company to purchase energy efficient equipment and products for California residences. True False 31. Taxpayers are allowed a tax deduction for interest paid or incurred on a public utility company financed loan that is used to purchase and install energy efficient equipment or products, including zone-heating products for a qualified residence located in California. Federal law has an equivalent deduction. True False 32. You may claim expenses related to producing income taxed by California law but not taxed under federal law by entering the amount as a positive number on line 41. True False 33. If you took the deduction for private mortgage insurance (PMI) on Schedule A (Form 1040), line 13, then subtract the amount on line 41 of Schedule CA (540). True False 34. If you reduced your federal mortgage interest deduction by the amount of your mortgage interest credit (from federal Form 8396, Mortgage Interest Credit), A.
Increase your California itemized deductions by the same amount. Complete a Tax Return
Complete a Schedule A, Form 8283, Form 540 and Schedule CA for Martin Perez (699-03-6021) and Norma Perez (554-09-3000). Martin claims his parents on his return. Paul Perez (SSN 580-16-6733). Lucy Perez (SSN 580-16-7683) . They had the following expenses for the 2008 tax year:
November 15, 2008, they donated the following items to Goodwill (1530 San Isidro Blvd, San Isidro, CA):
Additionally, they had the following in 2008:
Martin and Norma paid $ 14,400 in rent for the whole year. The property they rented from is exempt from tax.
35. Look at the Form 540 you prepared for Martin and Norma. What is the amount on Form 540, Line 18?
A. $ 11,607. 36. Look at the Form 540 you prepared for Martin and Norma. What is the amount on Form 540, Line 66?
A. $120. 37. If deducting a prior year charitable contribution carryover, and the California carryover is larger than the federal carryover, enter the additional amount as a positive number on line 41 of Schedule CA (Form 540). True False 38. Your California deduction may be different from your federal deduction. California limits the amount of your charitable qualified contribution deduction to _____ of your federal adjusted gross income.
A. 20% 39. If deducting a charitable contribution carryover of appreciated stock donated to a private operating foundation prior to 01/01/2002 and the fair market value allowed for federal purposes is larger than the basis allowed for California purposes, enter the difference as a positive number on line 41 of Schedule CA (Form 540). True False 40. Figure the difference between the amount allowed for California charitable contribution deductions using federal law and the amount allowed using California law. True False
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