On my 2023 Federal tax return I entered $16,000 for Investment Advisor Fees, they were not carried to California tax return

[JB_tax_man]

hi turbo tax community, On my 2023 Federal tax return I entered $16,000 for Investment Advisor Fees, they were not carried to my California tax return. I expect to see them as Other expenses: investment, safe deposit
box, etc. List type .., this shows as $0. Can someone explain? 

[JB_tax_man]

is this a bug ? user error or what? how do I report a bug? there's >2100 views and no response. 

[TomD8]

Investment advisor fees are deductible on a California return only if:

1. you itemize deductions on your CA return;

2.  the deductions exceed 2% of your AGI;

3.  the fees relate to taxable investment accounts.

[JB_tax_man]

thank you for the response. my question isn't about whether CA investment fees are tax deductible, in my case it appears that they are or may be. I can't seem to enter the value on my CA return. Is that a bug?

my question is since I took the standard deduction for Federal tax,  how do I make the investment fee entry on CA 540 schedule California Adjustments  Part II Adjustments to Federal Itemized Deductions line 21?

thanks in advance

[TomD8]

You need to enter the itemized deductions on your federal return (even if they're not allowed) in order for them to cross over to your state return.

[JB_tax_man]

thank you.  Where would those fees go on Federal form Schedule A? In Other Itemized Deductions? And, would that carry over to my CA 540? If so, where? 

[JB_tax_man]

they were entered. I'm starting to amend my 2023 return. as I enter Enter Investment Expenses screen, I see the amount I entered in 2023. It does not appear anywhere on my CA 540 form. What to do? 

[TomD8]

Schedule A, Other Itemized Deductions, on your federal return.

I don't have the California software on my computer, but I think those expenses would appear on Schedule CA (540). Part II, Line 21.

[JB_tax_man]

my thoughts too! It's not there..... what to do ?

[TomD8]

Hmmm.  Did you check the box at the Start of Part II that says "Check the box if you did not itemize for federal but will itemize for California".

[JB_tax_man]

good question. where would I find that? I use the online version. 

[TomD8]

Unfortunately TT Online does not give you direct access to your tax forms.  That's only available in the Download version.  You can see the checkbox at the top of Side Five in this PDF:

https://www.ftb.ca.gov/forms/2023/2023-540-ca.pdf

Also, previous similar questions indicate that you must enter all your itemized deductions on the federal Schedule A (thus allowing the program to then select the standard deduction for you) in order for the California crossover to work correctly.  See this:

What if I itemize for california but take standard deduction for Fed?

[JB_tax_man]

Thank you. 

ah-ha! I did not check that box on CA 540. Is this why it didn't carry over my Federal itemized deduction worksheet to my CA 540? 

 you must enter all your itemized deductions on the federal Schedule A (thus allowing the program to then select the standard deduction for you) in order for the California crossover to work correctly.

Pretty sure I entered all my itemized deductions on federal Schedule A and allowed the program to pick standard deduction.  Since I use the online version, I can't check the 2023 worksheet now.

Going forward, when I amend the 2023 return, after re-entering the Federal itemized deductions, the only thing that will change is the check box on my CA 540. Is that right?

Part II Adjustments to Federal Itemized Deductions

Check the box if you did NOT itemize for federal but will itemize for California

[JB_tax_man]

I tried to amend my return. The process does not allow me to enter my investment fees directly on Schedule CA (540) Part II, line 21 as investment fee.

Going through the amend process I only see Investment Income Expense and Other Adjustments to Income that are related but neither seem to apply to deducting investment fees. 

Is there a TurboTax method to do deducting investment fees?  

[MarilynG1]

The deduction for Investment Management fees was repealed in 2018, but will be reinstated for 2025 tax returns.

However, in 2023 some states allowed the deduction if you itemized your state return.  

These are no longer deductible from federal taxable income but some states do allow investment advisory fees to be deducted as itemized deductions if you are able to itemize on your state return. To enter:

1. Log into Turbo Tax
2. Go to Federal>deductions and credits
3. Retirement and investment
4. Other investment expenses.

You will see Investment Expenses on Schedule A, Line 16, Misc Itemized Deductions Worksheet.

You should then see them on CA 540, Line 21.

@JB_tax_man