california does not allow previous year unallowed K1 losses to carryover

[jainsanket]

Hello All, 

As a limited partner, i received K1. For year 2023, I had unallowed passive losses that were carried over on my federal forms 8582 (Passive Activity Loss limitations). For Federal 2024, I manually entered them on Turbo Tax. However, this is not reflected on my CA taxes. 

1) Does CA have limitations for carryover of previous year unallowed passive losses? If not, how can I add them on CA side as well. 

2) For the year 2024, I have additional unallowed passive losses for federal. Form 8582 correctly adds 2023 and 2024 unallowed losses for carryover to the next year. However, I do not see that happening on CA side. How can i fix this? 

Thank you

[jainsanket]

@SabrinaD2 , @hwilliams7 

Do you need anymore information to help me out here? 

[DaveF1006]

California has its own rules for passive activity loss limitations, which differ from federal regulations. The state requires taxpayers to file Form FTB 3801 to track and report passive losses.

1. Carryover of Previous Year Unallowed Passive Losses:

• California generally does allow the carryover of unallowed passive losses, but they must be reported separately from federal amounts.
• You need to manually enter prior-year unallowed passive losses on Form FTB 3801, ensuring they are correctly reflected in your California return. Adding 2023 and 2024 Unallowed Losses for Carryover:

        2. Since Form 8582 correctly tracks federal passive losses, California requires a separate calculation using California- 

            specific amounts

• If TurboTax is not automatically carrying over the losses, you may need to manually adjust them on Schedule CA (540) or Form FTB 3801 Worksheet.
• Check TurboTax’s state-specific settings to ensure passive losses are correctly applied to California’s tax return.

To manually adjust the unallowed passive losses, you will need to purchase TurboTax Desktop Premier so this will give you the ability to work in the forms. Please read the instructions for Form 3801 for specific information how to fill out the form.