Where to add Foreign Earned Income Exclusion FEIE back to CA 540NR?

[densefogg]

I understand CA doesn't recognize FEIE. So I'm trying to add it back on my California 540NR.

In the "Income and Adjustments" section, on the "Here's the income that California handles differently" page I see an option for "Combat Zone Foreign Earned Income Exclusion" but I'm not in a combat zone. I just need a place to add non-combat FEIE back in and can't find it, does anyone know where I do this? I'm using TT Do it Yourself Premium. Thanks.

[pk]

@densefogg , you are right in that CA ( and most states ) does not recognize FEIE and/or tax treaty based assertions.

Noticing that you are filing/talking about 540-NR, implying you are a Non-Resident of CA-- then why are you worrying about world income?   Are you a CA resident now or were you one for 2025 tax year ?  If your tax home is not CA then which country ?  Or are you saying that while you are abroad, you have significant connections to CA , like your home, family etc. are all CA based ?

I will circle back once I hear from you --yes ?

[densefogg]

@pk I'm domiciled/tax home in Mexico, Non Resident of CA for entire 2025 year, but earn CA sourced USD into a CA SMLLC which is partially included in the FEIE amounts (I also have USD income from other US states). So I thought I had to add that CA sourced FEIE back in to be taxed in CA? Correct me if I'm wrong, thanks!

FYI as an experiment I tried adding the FEIE back in the Combat Zone FEIE entry (even though I'm not in a combat zone) and when I downloaded the PDF of my return, it puts it in the right place (Line 8d Column C on the 540NR). So that seemed to work even though it's not combat. Seems to me TT needs a separate line for non combat FEIE, but maybe they just combined combat FEIE and non combat FEIE all in that one entry?

[pk]

@densefogg , based on your post /answer to my questions, my understanding of the situation is as follows:

(a) You a US person ( citizen/GreenCard ), have a tax home in MX,

(b) Unclear if your residency in CA ( you from there ? ) is suspended / terminated or still valid

(c) You have domestic ( MX sourced ) income -- what do you do ?   Internet based work or what ?

(d) For   US federal purposes , you file form 1040, including  SMLLC registered in California ) --- is this internet sales,  brick-mortar shop in CA,  or  what ?

1. Generally IRS will source income to where actual work is performed.  Thus if you are a digital nomad, working on contract from a US based entity  but perform work in MX, then the income is  MX sourced --- Foreign Earned Income.

2. I am unclear where to place your  SM-LLC -- reported on Schedule-C but sourcing depends on type of work.  I think California will  want a share of the income to be sourced to CA , if most of the users of your service are in CA.

3. Also if the source of the income turns out to be US / CA,  and both US and MX tax this income, then for FTC you have to resource the income per treaty.  

So please help clarify this --yes ?

[densefogg]

@pk 
I'm a US Citizen.

Used to live in CA but left a few years ago to Mx.

I do freelance design.

No clients in Mx, all are in the US. I earn in USD.

I file 1040 + CA 540NR because I have an SMLLC in CA supporting my CA based clients, so source + benefit of the work is in CA, hence my understanding is I have to pay CA tax for this work. Thus why I do FEIE for Federal, but add it back for CA.

[DaveF1006]

Yes, the entry will go on Line 8d on the 540NR regardless of whether it is combat or non-combat pay. The wording is confusing but line 8D is the only line to report this on your 540 NR. It is verified here. 

@densefogg 

[California88]

How do I add the FEIE into line 8d of form 540NR? I can't find where to do this with Turbotax online.

[DaveF1006]

You can't. TurboTax online does not prepare 1040 NR returns. You need to prepare these with Sprint Tax.

@California88