How the New Tax Laws Affect California Residents
By Michael Aston, E.A.
Alhambra Tax Center
How will “The Tax Cuts and Jobs Act” (TCJA) impact California residents on their state tax return?
The (new) Federal standard deduction will be: $12k for Single -- $18K for Head of Household --$24k for Married Filing Jointly.
California Standard Deduction will be: $4236 for Single -- $8472 for Head of Household and Married Filing Joint.
With the new changes: many Taxpayers will no-longer itemize on the Federal returns. But you may still qualify to itemize on your State returns.
Below are some of the federal changes that the State of California will not conform to.
· Deductions of taxes paid. Under TCJA there is a $10k combined cap on the following taxes, Property Tax, Vehicle License Fee (VLF) and State Taxes Paid or Sales Tax Paid (one or the other not both). Under the old system if somebody paid $16k in property tax (I know most people do not pay half of that but using the higher numbers to show the difference), $250 to the DMV for VLF and paid a total of $8K in state taxes, they would have $24,250 tax deduction on their Schedule A. Under the new federal laws, that will be capped at $10k. California never allowed State Taxes Paid or Sales tax deduction, so that has not changed, but California will not have a cap on the other two taxes, the taxpayer will be able to deduct $16,250.
· Unreimbursed business expenses. These expenses would be anything that an employee pays out of their own pocket and the employer does not reimburse, but it is business related. Some examples would be police officer uniforms, work tools, mileage and many more. Under the TCJA, these deductions are not allowed on the Schedule A as of 2018. California will allow them subject to a 2% threshold. The threshold means that the first 2% of a person income can’t be deducted, example somebody that makes $50k, the first $1k is not deducted but anything above that can be deducted. So if you would like to take these deductions for the State of California, keep the receipts and mileage logs going.
· Other Miscellaneous Deduction. Like tax preparation fees, will not be allowed, but California will allow them with the 2% threshold.
I recommend to keep your records updated. Even if you were told you’re not able to take the itemized deduction for 2018.
In the past…California would conform to the Federal tax laws. But with the Federal TCJA changes – you may still be able to itemize on your California tax return.