CA - Adjustment for investment income expenses

[CP01]

Hi,

For the above in CA tax it says the below. I entered investment expenses in Federal I guess that should transfer to CA. My question is regarding the interest income taxed I invested in bonds and received 1099-INT entered the information in Federal under income. Would I enter the bonds interest here? Please advise. 

If you deducted investment expenses against interest income taxed on the federal level, but not by California (such as U.S. Government bonds), enter the amount as a negative number.

If you had expenses related to producing California-taxed income that is not taxable at the federal level (such as municipal bonds of states other than California), enter the amount as a positive number.

[CP01]

In addition to my original question. If I entered investment expenses on the federal side and if it carry's over to CA state do I still enter the amount here as a negative or positive. Thanks

[MonikaK1]

In the California section, the questionnaire is to help you identify changes needed to the California return. The California return starts with Federal adjusted gross income. So, if you have investment expense entered in the Federal return but some of the expenses are to produce income that isn't taxed by California, you would only need to subtract that portion of the expenses. You can only deduct investment expenses for California that were incurred in generating income that is taxed by California.

See the Instructions for California Schedule CA for line-by-line guidance.

[CP01]

Hi Monika,

Thanks for responding. To confirm, I should not include the interest I received from the bonds here that was part of 1099-INT?

If the investment expense was for a managed account how would I know how much to put for California?

[MonikaK1]

You would enter as a negative number any investment expense that you entered on the Federal return that was attributable to income not taxed in California. 

If the expense was incurred to manage an account that has items both taxable and not taxable by California you could allocate the percentage that applied to nontaxable California income. If the fee is the same regardless of the California items, you don't have to enter any adjustment.