California capital gains: why the subtraction?

Forum|Forum|4 years ago
November 17, 2021
15 replies
112 views

Turbo Tax 2020 takes all my cap gains from Federal Sched D and makes them a subtraction on the California Schedule CA. As a result, by default, my CA return would pay no taxes on the capital gains. This seems just wrong and a Turbo Tax bug. My CPA says there is no reason that the Federal cap gains would not be taxable.

Turbo Tax, can you please explain the behavior?

GeorgeDenseff

Level 8

California taxes long and short term capital gains as regular income. No special rate for long term capital gains exists.

schwarczAuthor

Level 2

Thanks for the response. Perhaps my posting was not clear enough.

Fed cap gains is taxable in California but TT makes the Fed cap gains a California subtraction (see Sched CA(540) line 7 column B Subtractions. I believe this excludes the amount of cap gains from California taxable income and leads to an underpayment of taxes.

Am I incorrect here?

GeorgeDenseff

Level 8

I cannot see your return but the capital gains should be added to your other income and taxed at the same rate. If it is not being taxed at all, there may be a problem with your software. Customer support will be able to pull a copy of your return and analyze it.