The question about the "additional mortgage interest not allowed by federal" is not clear to me on my California return. For the first time in decades, the standard federal deduction exceeds my itemized deductions. I would assume this means California will not allow the deduction, but that wasn't 100% clear in the instructions.
Good question. The federal tax law changes at the end of 2017 limited the amount of mortgage interest you could deduct on your federal return. While the full details are in IRS publication 936 (https://www.irs.gov/publications/p936), the gist is that only the mortgage interest on the first $750K or $1MM of the loan is a federal itemized deduction. The good news for us CA residents is that CA allows _all_ the mortgage interest to be a CA itemized deduction. Furthermore, it may very well be to your benefit to itemize on your CA 540 even if you take the standard deduction on your IRS 1040. (That's what I'm doing this year.) Note: PMI is not a deduction on 2018 Fed or CA income tax.
Still a bit unclear as to how much of my mortgage interest I can claim on CA itemized deductions if I use the federal standard deduction.
Mtg Interest paid in 2018: $8,800
Qualified Interest I could have claimed if I had itemized on Fed taxes: $4,378
Qualified Interest I could claim when itemize on CA taxes: $8,080
On my CA adjustments worksheet, TT plugs in $3,699 as the amount I can add back (difference between $8,080 I can claim on CA taxes and $4,378, the amount I could have claimed if I had used standard deduction on Fed taxes). Is this correct, or can I claim the full $8,080 and how do I override the figure TT automatically plugs in?
It looks like you did the right thing and put in all your allowed itemized deductions on your federal return. Turbotax carries over that total to the state return and you only need to enter the part that was disallowed.
Finish your state inputs and look carefully at what total deductions show for the state.
Perhaps I'm making this more complicated than it should be, but I'm still unclear as to which Mtg. Int deduction figure should be included in the CA adjustments. Since I used the Fed standard deduction instead of itemized deductions for Fed tax return, shouldn't I be able to add back the entire CA qualified mtg interest ($8,080) on my CA adjustments?
Case 1: (use the figure TT automatically plugs in to Col C)
Accept the figure TT automatically plugged in to Col C, $3,699. This is the difference between qualified mtg int allowed if I had itemized on my federal return (Col A $4,379) and the qualified mtg int allowed for CA deduction ($8,080).
Case 2: (override TT figure in Col C and add a comment)
Enter $8,080 in Col C to add back the full amount that CA allows. Add an explanation why this figure was used.
Case 3: (override TT figure in Col A and add a comment)
Enter $8,829 in Col A (total interest paid) to override the figure that TT pulled from Fed itemized deductions ($4,379). Add an explanation why this figure was used.
I previously tried manipulating figures in TT, but kept getting errors on my review, and finally gave up.
The answer is that you do not override TurboTax in this situation. The reason is that in order to receive the additional deduction, CA requires a copy of the federal Schedule A, whether or not one is used for the federal return, and entries on the 540 Schedule CA are added or subtracted from those on the relevant federal forms. I was in this situation in 2018 with an additional property tax deduction above the $10K state and local tax limit that had caused me to use the federal standard deduction for the first time in decades.