Intangible drilling cost in California

[PatriciaV]

You may be able to make this adjustment in TurboTax Online from the State tax interview for California. 

1. Go to Income that California handles differently >> Partnership K-1.
2. Edit the K-1 that has IDC.
3. Enter a zero on Lines 13d and 17f.
4. Continue back to the California return summary page.

@kashyapvijay 

[kashyapvijay]

I already tried this but it still doesn't add intangible drilling costs to California taxable income. The turbotax support representative also tried this but couldn't get this adjustment reflected on California tax forms generated. It seems Turbotax didn't update the software for 2024 California income tax law disallowing IDC deduction. Amended California return form also has the same issue. 

[PatriciaV]

To add the IDC deduction back to California taxable income, go to the State tax interview for California. 

1. Continue to Income that California handles differently >> Partnership K-1.
2. Edit the amount of federal IDC to Box 1 Ordinary Income
   Calculate and enter the total, not just the IDC. 
   If you're using TurboTax Desktop, right-click and Add Supporting Details to allow TurboTax to make this calculation for you.
3. Continue back to the California return summary page.

@kashyapvijay 

[Nhanda]

I added federal deduction as additional income in Schedule CA(540): California Adjustments. 

[Chris-was-here]

No way to use IDC against California state taxes anymore - starting 2024 the state made you add it back on Schedule CA. The good news is you still get the full federal deduction, which is usually the bigger lever for high earners. For state, you’ll need other moves (max retirement, muni bonds, maybe entity structuring if you open a business).

So the benefit is still very real at the federal level, but for high earners in California, you just can’t use IDC to lower your California state taxes anymore.