Federal vs. California
Federal tax reform approved in December 2017 changed many areas of federal income tax law. These new laws may conflict with state income tax law.
What you should do now
- Review your paycheck withholding
- Make sure you are having enough taxes withheld.
- You may need to increase your withholding. Use the Withholding Calculator offered by the IRS.
- Consult a professional tax preparer
For more on the federal tax reform, visit irs.gov.
Credits and Deductions
Here are some key areas of the tax reform. The changes may affect your 2018 tax return that most will file in early 2019:
- One goal of the tax reform was to simplify tax filing by increasing the standard deduction so some taxpayers will no longer need to itemize deductions on their federal tax returns.
- You may want to itemize on your CA return, but take the increased standard deduction on your federal return.
State and Local Taxes
- Federal law limits your state and local tax (SALT) deduction to $10,000 if single or married filing jointly.
- California does not allow a deduction of state and local income taxes on your state return.
- California does allow deductions for your real estate tax and vehicle license fees.
- Federal law limits deductions for home mortgage interest on mortgages up to $750,000 for loans taken out after December 15, 2017.
- California allows deductions for home mortgage interest on mortgages up to $1 million.
Child Tax Credit
- Federal law raised the child tax credit to $2,000 per child and $500 for other qualifying dependents.
- California does not offer this credit.
- Federal law limits charitable contributions to 60 percent of your federal adjusted gross income.
- California limits charitable contributions to 50 percent of your federal adjusted gross income.
- Federal law limits moving expense deductions to members of the Armed Forces on active duty.
- California allows you to deduct work-related moving expenses subject to distance and time requirements.
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