Regarding Box 13, Code AE on my K-1 from a partnership

[ttcustomers]

As far as I know, Code AE portfolio deductions are suspended at the federal level under the Tax Cuts and Jobs Act. However, when I entered $1,913 for Code AE in TurboTax, my federal refund increased by approximately $350.

I am a California resident. While I understand California does not fully conform to the TCJA suspension, this would affect my state return — not my federal refund.

Could it be that TurboTax may be handling this entry incorrectly?

[PatriciaV]

The increase in your federal refund may not be directly influenced by your Schedule K-1 entry. You would need to review the worksheets that flow onto Schedule A.

According to the IRS Instructions for Form 1065 Deductions—portfolio income (code AE):

"Enter amount of deductions related to portfolio income which were formerly deductible by individuals under section 67 subject to the 2% AGI floor. For partners other than individuals, amounts that are clearly and directly allocable to portfolio income (other than investment interest expense and section 212 expenses from a REMIC) can be deducted on those partners’ income tax returns."

Have you checked the Miscellaneous Itemized Deductions Worksheet (a TurboTax form)? When you enter a value for Box 13 Code AE, the amount should appear on Line 16 of this worksheet. Although the deduction is not allowed for federal tax purposes, it may be transferred to your state income tax return.

You can view this worksheet in TurboTax Desktop using Forms Mode. If you're using TurboTax Online, you'll need to print your return, including all forms and worksheets. See How do I get a PDF of my return?