Is the UCE amount of $10,200 suppose to be under the addition column? TurboTax automatically put it under addition but isn't it suppose to be a subtraction?

[elim99]

This is for CA state taxes. TurboTax states that additions are items that "get taxed on your California return but not on your federal return". Aren't unemployment compensations federally taxable but not taxed in CA? So wouldn't the UCE amount be considered a subtraction instead?

[JotikaT2]

You are correct, unemployment income is not taxable in California.

The amounts used on your California return flow in from your Federal Adjusted Gross Income, which does not include the first $10,200 in unemployment income per the changes instituted by the American Rescue Plan.

IRS Statement on American Rescue Plan

Your California return has been updated to reflect all of these changes.  You will see the normal reduction of unemployment on Schedule CA, line 7, Column B as California does not tax unemployment income.

On your Schedule CA, the amount is added back on Line f, column C.  This essentially creates a $0 effect on your state return to ensure your unemployment income is not excluded twice.  

[V_BL]

Under other taxable income, my CA refund amount is now less. When I enter UCE subtraction amount 10,200 it goes back to original refund amount before tax exemption bill update. Is this the correct way to proceed? Or should I accept the new lower refund amount with the 10,200. entered as addition without subtraction?  

[DMarkM1]

Your CA refund/tax due should not change based on the new federal exclusion.  CA doesn't tax any Unemployment Benefits.  So your original CA refund would be correct as it already excludes all UE.  So the addition with subtraction net zero is correct.

[fanfare]

@V_BL 

 I believe you because the IRS used "Other Income" to add a negative amount to your income.

Sounds like a quick and dirty kludge to me.

This  can also have interesting other side effects on your Federal return such as EIC.

[rk666]

so if turbotax auto-populates my CA UCE to an adjustment ADDITION of $10,200 that is correct? There is no amount in the SUBTRACTION box for UCE, only the addition (making it look a lot more like I'll get taxed... it makes no sense)

[DaveF1006]

No, you will not get taxed twice. Let me explain this as simply as I can. California does not tax unemployment benefits period. If you look at Section B, Line 7 of Schedule CA, your entire unemployment is reported in Column A BUT subtracted out in Column B. As a result, your entire unemployment compensation is untaxed.

Now $10,200 is added back into your California return on Schedule CA  and Line 16 of your CA 540. This is because the federal AGI that is transferred over from the federal return reflects the $10,200 federal unemployment exclusion. This must be added back to your California AGI to correctly reflect your correct CA taxable income amount.  If allowed to be unchanged, not only will not not be taxed for the entire amount of your unemployment benefits, you would be receiving a $10,200 income exclusion on top of it.  It would be like double-dipping into the candy jar. The addition only restores California taxable income to normal.