Does California allow non-deductible contributions to traditional IRAs when over 70 1/2?

California Franchise Tax Board's Pub 1005 (2024 Pension and Annuity Guidelines) page 3 says: "The federal SECURE Act was enacted on December 20, 2019. In general, California R&TC does not conform to the changes. California taxpayers continue to follow the IRC as of the specified date of January 1, 2015, with modifications. California law does not conform to the federal provision that repealed the maximum age of 70 1/2 for traditional IRA contributions." This would seem to PROHIBIT ALL traditional IRA contributions for those over 70 1/2.

But the IRA Deductions section of Pub 1005 (page 6) says: "The SECURE Act repealed the maximum age of 70 1/2 for traditional IRA contributions. California law does not conform to this federal provision. If you report an IRA deduction on Schedule CA (540), Part I, or Schedule CA (540NR), Part II, Section C, line 20, column A at age 70 1/2 or older, include that amount deducted for federal in the total you enter on Section C, line 20, column B." This would seem to ALLOW traditional IRA contributions when over 70 1/2, but require treating those contributions as non-deductible for California.

My question: Given that the federal SECURE Act has repealed the max age of 70 1/2 for traditional IRA contributions (but California doesn't conform), are California residents who are over 70 1/2 ALLOWED to make contributions to their traditional IRAs, as long as either:

1. The traditional IRA contributions are treated as non-deductible for both Federal and California (by filing IRA form 8606), or

2. Even if the traditional IRA contribution is treated as deductible for federal taxes, the contribution is treated as "non-deductible" for California by adding the federal deduction onto Schedule CA Section C line 20, column B?

3350

Expert Alumni

Mar 12, 2025 6:49:35 PM

California requires you to add back the contribution, however the state doesn't have an excess contribution penalty like the federal. Effectively, the law just turns the contribution into a nondeductible contribution.

You will need to keep track of this nondeductible contribution. When you withdraw from your IRA, the full amount will be taxable on the federal return but not for California. You will need to make an adjustment on your California return to reduce your income by the amount that considered nontaxable for that year.

Returning Member

Mar 13, 2025 7:52:40 PM

Thanks Kesha! I want to make sure I understand your comments.

1. Does "add back the contribution" mean that the contribution is ALLOWED but if the contribution was deducted on my federal return then I must reduce my California deductions by the amount of the contribution (effectively treating it as non-deductible for California)?

2. If the contribution was declared NON-DEDUCTIBLE on my federal return (via Form 8606), then the contribution is still ALLOWED in California, and no California adjustment is needed because there was no federal deduction to "add back". Would you agree?

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Does California allow non-deductible contributions to traditional IRAs when over 70 1/2?