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California doesn't tax social security benefits but it's part of federal income. How is Social Security subtracted from income on state return?

How do I decrease the amount of deductions on state return because California does not allow the car registration fees that the federal return does?
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Employee Tax Expert

California doesn't tax social security benefits but it's part of federal income. How is Social Security subtracted from income on state return?

The taxable portion of your Social Security benefits is automatically adjusted when the information transfers over from the federal return to the state. On your CA return, this will show as a subtraction  to income on Schedule CA. Your itemized deductions are also automatically adjusted for the allowable California deductions.

For the car registration feesCalifornia law is the same as federal law regarding the deduction allowed. Therefore, if you itemized your deductions on your federal return and claimed a deduction for the vehicle license fee, no adjustment to your California return is needed on schedule CA. See  this link: https://www.ftb.ca.gov/individuals/faq/ivr/222.shtml

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Level 2

California doesn't tax social security benefits but it's part of federal income. How is Social Security subtracted from income on state return?

CA claims it does not tax SS but if you are paying federal taxes on your SS only that amount is subtracted from your CA income.  So if you are paying Federal taxes on 85% of your SS you will also be paying CA taxes on 15% of your SS.   How can CA claim it does not tax SS?

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Employee Tax Expert

California doesn't tax social security benefits but it's part of federal income. How is Social Security subtracted from income on state return?

That's not how it works.

 

Suppose you received $12,000 in SS benefits, and that because of other income, 85% of your benefits were taxed ($10,200).

 

When the federal numbers come over to CA, CA starts with the federal Adjusted Gross Income (AGI) on line 13 of form CA 540. In that AGI number, the $1,800 that is not taxed on the federal is not present - so the $1,800 is not taxed in CA.

 

And as Isabella pointed out, on line 14, the $10,200 will appear as a subtraction, to subtract out the taxable portion of the SS benefits on the federal return.

 

So the $1,800 is not taxed in CA and the $10,200 is not taxed in CA, and together these add up to the original $12,000. California does not tax SS benefits.

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