Disallowed Non-working Spousal IRA Contribution

[GaryP9]

I am getting a head start on 2021 taxes using TurboTax 2021. I noticed that when I entered a deduction for a non-working spousal IRA contribution based on my salary income (we file MFJ), that TurboTax allowed the deduction for the Fed taxes, but disallowed it for the State of California taxes. Is a non-working spousal IRA contribution really not deductible on California taxes if the other spouse has a salary that exceeds their combined contribution and they file married jointly? That doesn't make sense to me. Or is this a bug in TurboTax?

[Critter-3]

Contributions to an individual retirement arrangement, or IRA, that you deduct on your federal income taxes are also deductible on your California state income taxes. However, you don't actually "take" an IRA deduction anywhere on your California tax return.   The California return uses your federal adjusted gross income as a starting point for computing your state taxable income -- and your federal AGI already includes your IRA deduction.

Also the CA 2021 program is not available yet and what is will not be fully functional until sometime late January.

When will my forms be ready?

Historically, IRS tax forms start becoming available in January, with a few stragglers (most notably Form 1040X) getting finalized in February.

State tax forms can become available for filing any time between December and late February, depending on the state and the tax form.

For specific forms and dates, refer to the Forms Availability Table for your TurboTax product, see the related information below.

Can I Still Work On My Return Before My Forms are Ready?

Yes, according to the following:

Federal Taxes
You can still work on your return and finish most of it. Once your forms become available, we’ll create the forms and include all of your info.

You’ll only be able to e-file or print your return once the forms are available.

While you’re working on your return, we’ll ask if you want to receive email updates when your forms become available.

State Taxes 
If your forms aren’t available, you’ll get a message asking you to return once they become available.

While you’re working on your return, you’ll have a chance to let us know you want to receive email updates when your forms become available.

[Bsch4477]

What is line 19 of Sch 1 showing as an IRA deduction?

[GaryP9]

I already know that. TurboTax took our full $14,000 IRA contribution from the Fed form but then inserted a "Subtraction" of $7000 on the Adjustments to Income part of the California return with a note saying it is a disallowed IRA deduction. Thus my question as posted.

[GaryP9]

It's actually line 20 of Schedule 1.  That says $14,000.

[Bsch4477]

I think @Critter-3 has your answer. Too early to be sure the program has full functionality and the state program and forms have not yet been finalized. 

[GaryP9 · Accepted solution]

I figured it out. TurboTax is correct as is. It turns out that California law does not conform to Federal law on deductible IRA contributions for those over 70 1/2 (the SECURE Act repealed that age limit, but California doesn't recognize that change - at least not yet). My spouse is over 70 1/2 -- that is why her contribution is not deductible for California taxes. However it is still deductible for Fed taxes.

[Critter-3]

Good to know ... many states will need to review this issue and decide on what they will allow or not allow. 

If you switch over to the FORMS mode and look at the CA worksheet you should also see the explanation that way.  

If you are trying to do some tax planning then use the fully operational 2020 downloaded version instead. 

This is my mini version of  a tutorial  that should be in the downloaded program: 

 

What is Forms Mode?

Forms Mode lets you view and make changes to your tax forms "behind the scenes."

If you're adventurous, you can even prepare your return in Forms Mode, but we don't recommend it. You may miss obscure credits and deductions you qualify for, and you may forget to report things that will come back and haunt you later.

Forms Mode is exclusively available in the TurboTax CD/Download software. It is not available in TurboTax Online.

Related Information:

• Why would I use Forms Mode?
• How do I switch to Forms Mode in the TurboTax for Windows software?
• How do I switch to Forms Mode in the TurboTax for Mac software?
• What is-the-meaning-of-all-the-different-colors-in-forms-mode

If you want to play around with different figures and tax scenarios without affecting your original return you can ….

• >>>In the TurboTax CD/Download software by creating a test copy: 
• 1.  Open your return in TurboTax. 
• 2.  From the File menu, choose Save As. 
• 3.  Give the copy a new name to distinguish it from the original (for example, by adding "Test" or "Example" to the file name). 
• 4. Click  Save. You are now safely working in the test copy and anything you do here will not affect the original. 
•  https://ttlc.intuit.com/questions/1900642-how-to-make-a-test-copy-of-your-return

• >>  use the WHAT IF tool: 
• - Click Forms Icon (upper right of screen) or Ctrl 2 (forms view) 
• - Click on the Open Form Icon 
• - In the “Type a form name.” area type What-If (with the dash), click on the name of the worksheet - click on Open Form 
• - You will see the worksheet on the right side of the screen; enter the information right into the form 
• - To get back to interview mode - click on the Step-by-Step Icon (upper right of screen) or Ctrl 1

Once you have filed shut off the auto updater function and save the return and .taxfile.

It's always a good idea to make a backup copy of your tax data file, in case your original gets lost or corrupted. Here's how:

1. From the File menu in the upper-left corner of TurboTax, choose Save As (Windows) or Save (Mac).
2. Browse to where you want to save your backup.
   • Tip: If you're saving to a portable device, save it to your computer first to prevent data corruption. Then, after completing Step 4, copy or move the backup file to your device.
3. In the File name field, enter a name that will distinguish it from the original tax file (for example, add "Backup" or "Copy" to the file name)
4. Click Save and then close TurboTax.
5. Restart TurboTax and open the backup copy to make sure it's not corrupted. If you get an error, delete the backup and repeat these steps.

If you make changes to your original tax return file, repeat these steps to ensure your original and backup copies are in-synch.

Related Information:                             

• Retrieve a Tax File from a Portable Device
• What's the difference between the tax data file and the PDF file?

AND save it as a PDF so you have access to a copy even if you don’t have the program still installed and operational :

• How do I save my return as a PDF in the TurboTax software for Windows?
• How do I save my return as a PDF in the TurboTax software for Mac?

AND protect the files :

• How can I protect the tax files on my computer?

*** Other clues to the downloaded program ***

In the forms mode ... double click  or right click on a box on a form to data source it ... sadly it doesn't work on all boxes. 

What's the meaning of all the different colors in Forms Mode?

When you look at an onscreen tax form using Forms Mode, you might wonder why one figure is blue and the one next to it is red or black.

These colors indicate the source of that data.

Color	Meaning
Blue	You entered this data, either in the interview or Forms Mode.
Black	The program entered this data or calculated this amount.
Red	This data has either been overridden or is invalid (for example, a ZIP code that doesn't exist).
Red italics	You marked this amount as estimated.
Black italics	The program calculated this amount from an amount you marked as estimated.
Purple	This information has supporting details.
Aquamarine	This data was transferred over from last year.
Green	This data was imported from Quicken or QuickBooks.
Yellow fields (Windows)	Yellow fields allow user input. Anything you enter here shows up in blue.

[fanfare]

New Jersey doesn't allow any deduction for an IRA or 401k contribution.

I guess you don't really care about that.

As the NJ gov said before winning re-election, if you don't like the taxes, maybe NJ is not the state for you.