Issues with CA Form 3800.

[anchanamaka]

I can be claimed by my parents for 2025 as a dependent. I started graduate school and established residency in California during 2025, and some of my scholarships were considered taxable and exceeded 2700$. Unfortunately, I could not claim any education credits and my parents were also ineligible. This means that, for my federal return, I had to fill out Form 8615. 

TurboTax is prompting me to fill out form 3800, when I am completing my CA state taxes. However, my parents are not residents of CA and did not receive any CA-source income, since they live in another state. Therefore, they did not complete CA Form 540 or Form 540NR. How do I proceed with Form 3800 in this case? 

[anchanamaka]

I believe there is an issue with the form. Since my parents do not live in CA, I entered 0 for all lines prompting me about their 540/540NR. Line 18 says that it should take the the maximum of line 16 and line 17, but the value in line 18 is not corresponding to either of those, but is a higher number instead. I believe this is a bug with the software. My token number is #13915434168795589-57971756

[DaveF1006]

Dealing with the "Kiddie Tax" (Form 3800) when your parents aren't California residents is a common point of confusion in tax software. Because California generally conforms to federal law regarding unearned income for dependents, you are required to fill out this form if your taxable scholarships (which CA treats as unearned income) exceed the threshold ($2,700 for 2025). 

Here is how you should handle the non-resident parent situation and the potential "bug" you're seeing on Line 18.

1. How to Handle Non-Resident Parents

1. Since your parents do not file in California, they have zero California taxable income. However, Form 3800 is designed to "borrow" the parent's tax rate. 
2. Parent's Taxable Income (Line 6): You should enter your parent's Federal Taxable Income here. Even though they aren't CA residents, California uses the parent's total taxable income to determine the marginal tax rate that should apply to your unearned income. 
3. Parent's Tax (Line 10): Since they didn't file a CA return, their California tax is indeed $0.
4. By entering their federal taxable income on Line 6 but $0 tax on Line 10, the form calculates what the tax would be on their income plus yours, and then subtracts the $0 they actually paid. This effectively taxes your "excess" unearned income at the high rate it would have hit on their return.

2. Addressing the "Line 18" Bug

1. You mentioned that Line 18 (which should be the maximum of Line 16 and 17) is showing a higher number than either. This usually happens in TurboTax for one of two reasons:

• Mental Health Services Act (MHSA) Tax: If your taxable income is exceptionally high (over $1 million), California adds a 1% surcharge. However, for a graduate student, this is unlikely.
• The "Schedule P" Factor: If you are subject to the Alternative Minimum Tax (AMT) in California, the software may be layering that into the final tax calculation on Line 18.

If the number is truly arbitrary and doesn't match the math on the paper form, it is likely a rounding error or a "forced" field in the software's interview mode.

3. How to Proceed

1. Check the Parent's Income Entry: Ensure you didn't leave the parent's income blank. If you enter $0 for their income (when they actually have income, just not in CA), the software might be defaulting to a standard calculation that conflicts with the Kiddie Tax rules. Use their Federal Adjusted Gross Income or Taxable Income as prompted by the instructions for Line 6. 
2.  If your parents' income was entered as $0 on Line 6 because they aren't CA residents, that is likely the cause of the error. California law requires using the parent's total taxable income (from all sources) to find the correct tax bracket, even if that income isn't taxable by California itself.