Nonresident CA Gig Work, CA IRA Deduction. Am I doing this correctly?

[majorsevensharpeleven]

Hi,

I live in NY and make some income as a gigging musician. in 2021, that amounted to $2075. Of that amount, $1125 was from a single gig I played in CA. The other $950 was made in NY (didn't work much as a musician in 2021, haha). 

After entering my expenses for these gigs, most particularly the travel expenses associated with taking this CA gig, my net profit for this business on Schedule C is about $284 of income. When filing my 1099's, I went ahead and filled out a Nonresident return for CA, to report the 1099 I received for the California income. Given the Schedule C has me take into account all income, and all expenses, in order to figure out how much of that net profit is "CA income", I took the percentage of my gross that was CA ($1125 / $2075) and applied that to my profit. Meaning about $154 of that $284 of net income is attributable to the CA gig I played. Is this a correct way to do it? 

This caused me to owe about $1 or $2 to CA in state taxes. However, when proceeding to complete my CA adjustments section, the software auto-populated my CA state IRA deduction with the $154 I reported as CA income. The HELP info states: 

California instructions state that the amount to enter for the California deductible IRA payments is the lesser of your federal IRA deduction and your California earned income. We've estimated that amount here for you.

This naturally results in me owing $0 in CA taxes. Is this correct? I feel weird about it and kind of like I'm not doing something correctly. This would also mean I need to make sure that my NYS IRA deduction is not automatically reflecting my full federal deduction then, right?

[MaryK4]

Using the percentage of income applied to the expenses is perfectly acceptable allocation (and the easiest).  You can also sort through each expense of any are directly connected to the gig in California (but once again, this is cumbersome and your method is fine).  

Also, applying the IRA deduction to the California income is proper, California does not require you to allocate the deduction.  

[majorsevensharpeleven]

@MaryK4  Thank you for the reassurance!

So if I'm applying $154 of my IRA deduction (filing jointly, and my full federal IRA deduction is the entire $12,000) to my CA state taxes, this essentially "cancels out" my small amount of Nonresident CA income (zeroing out my CA tax obligation)?

Should I be making sure to subtract this from the amount of the IRA deduction I take on my NY return? (i.e. NY IRA deduction should be $11,846 as opposed to $12,000)

[RobertB4444]

@majorsevensharpeleven  Your California filing requirement is $12,550 in gross income.  Because you have some self-employment tax you might have a filing obligation anyway but as you point out your deductions reduce you below the filing thresh hold,  I would skip the California return and only deal with it if they send you a letter.

That being said New York taxes all of your income - even that earned in California - so take the full $12,000 deduction.