When you prepare your return using TurboTax, enter all of your income and deductions in the Federal section.
After you finish with the Federal section, prepare your State return. Follow the TurboTax questionnaire to make adjustments needed for items that are different for California. See below for further instructions if you have passive loss carryovers from last year.
California law has not always conformed to federal law with regard to depreciation methods, special credits, or accelerated write‑offs. Consequently, the recovery periods and the basis on which the depreciation is calculated may be different from the amounts used for federal purposes. See the instructions for Form FTB 3885A for more information.
California law does not conform to the federal law for:
- IRC Section 168(k) relating to the depreciation deduction for certain assets.
- The enhanced IRC Section 179 expensing election.
- The expanded definition of IRC Section 179 property for certain depreciable tangible personal property related to furnishing lodging and for qualified real property for improvements to nonresidential real property
California law does not conform to the federal limitation amounts under IRC Section 179(b)(1) and (2). For California purposes, the maximum IRC Section 179 expense deduction allowed is $25,000.
Passive loss carryovers are not reported on Schedule E. They are reported on the federal Form 8582 and on the California Form 3801. TurboTax will prepare these forms from your entries in the questionnaire.
To enter the information, do the following if you have passive loss carryovers for California:
- You should make sure that such amounts are entered in the TurboTax/California (TT/Calif) activity.
- Go to that activity (rental, k-1, etc.) and Edit it.
- You will be asked if you have any carryovers associated with that activity. Select Yes and you will then have the opportunity to enter them.
The amounts are usually transferred in from your prior year TT/Calif return, but you must enter them if using TurboTax for the first time.
See this TurboTax tips article for more information on depreciation and Section 179 expenses.
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