I figured it out. TurboTax is correct as is. It turns out that California law does not conform to Federal law on deductible IRA contributions for those over 70 1/2 (the SECURE Act repealed that age limit, but California doesn't recognize that change - at least not yet). My spouse is over 70 1/2 -- that is why her contribution is not deductible for California taxes. However it is still deductible for Fed taxes.
