California IRA contribution adjustment

[willatbird]

Taxpayer and Spouse are both in mid-50s. Husband has lots of W2 income, spouse has no earned income. No retirement plans at work.

Both contributed Max to their IRA ($8,000 each). Full deduction was allowed for Fed. California is adding back $1,000 each on the Schedule CA line 20, but the CA worksheet does not show any reduction necessary.

I can't come up with any reason why the deduction has been limited. Any assistance would be greatly appreciated.

[qbteachmt · Accepted solution]

"Catch-Up Contributions for Certain Individuals – For taxable years beginning on or after January 1, 2024, the CAA, 2023, provides for the indexing for the $1,000 catch-up contribution to an IRA for individuals age 50 or older. The CAA, 2023, also increases certain contribution amounts, including catch-up contributions for individuals age 50 or over as defined in IRC Section 414(v). California law does not conform to these federal provisions. Any amount contributed that exceeds the contribution amount allowed for California may need to be included in income for California purposes. Any distribution from contributions in excess of the California limit may become taxable when distributed. For more information, get the instructions for Schedule CA (540) or Schedule CA (540NR) and FTB Pub. 1005."

From: https://www.ftb.ca.gov/forms/2024/2024-3805p-instructions.html

CAA is the Federal provision.

[willatbird]

Thank you for that link. This page does not mention the "does not conform" part. I appreciate you taking the time to answer.

https://www.ftb.ca.gov/file/personal/deductions/ira-deduction.html#:~:text=to%20deduction%20limits.-...

[qbteachmt]

The instructions for Form 3805P cover it.

The instructions for Form 540 cover it.

You might want to call FTB yourself.

[JFritz]

 CA conforms to the $1,000 catch up contribution. 

Can we expect a program update based on the below information?

While it is true that California does not conform to the CAA provision indexing the IRA catch-up contribution amount, there has been no change to conformity for catch-up contributions generally. 

CA currently conforms to federal law as of the specified date of January 1, 2015 (RTC Section 17201(b)) with the modification that any references to “compensation” or “earned income” for purposes of computing federal limitations on the deductions for qualified retirement contributions, shall apply also to California for the same taxable year. (RTC section 17203.)[1]

Without additional action, California will not automatically conform to the indexing provision, but per the FTB website as well as the draft Publication 1005, California taxpayers age 50 or older may still make a catch-up contribution of $1,000.

https://www.ftb.ca.gov/file/personal/deductions/ira-deduction.html

[1] Details of Public Law 117-328, section 108: https://www.ftb.ca.gov/about-ftb/data-reports-plans/Summary-of-Federal-Income-Tax-Changes/index.html...