Intangible Drilling costs - California Tax Return

[turner121]

How does one report Intangible Drilling costs on California Tax Return in TTD?

[PatriciaV]

To enter the correct amount of California IDC to deduct, open your California return:

1. Go to Income that California handles differently >> Partnership K-1.
2. Edit the K-1 that has IDC.
3. Enter the California IDC amount on Lines 13d and 17f. Note that this may not affect your California income. But your California K-1 will not report excess IDC.
4. Continue back to the California return summary page.
5. Click Edit/Start beside Credits and Taxes.
6. Scroll down to Taxes >> Alternative Minimum Tax (AMT) and click Start/Revisit.
7. Start AMT.
8. Continue to the page "AMT Adjustments and Preferences."
9. Enter the amount of IDC expense allowed by California in the box for Intangible Drilling Cost.
10. Continue back to the California return summary page.

Note that only the AMT portion will have an effect on your California taxable income (if applicable).

[Chris-was-here]

On your California return in TurboTax Desktop (TTD) you need to make a manual adjustment, since CA no longer allows the IDC deduction starting with costs incurred in 2024.

Here’s how:
1. Go to your CA state return in TTD.
2. Open Schedule CA (540).
3. In the “Additions” section, enter the IDC amount that flowed from your federal K-1.
4. This adds the deduction back to income for CA purposes (so you only get the benefit federally).

That’s it—the key is IDC is fully deductible on the federal return, but must be added back on the CA return.

If you let TurboTax do it automatically, it will usually leave the deduction in place for CA, which is incorrect - you have to adjust it yourself.