Friday, April 5, 2019

You May Still Itemize on Your California Tax Filing!

Pathways Advisory Group, Inc.
      Dustin J. Smith, CFP®

The tax code was simplified.  With a larger Standard Deduction (amount all taxpayers can deduct, if greater than the total of your itemized deductions), many of you can stop tracking itemized deductions altogether.  As a matter of fact, it’s so easy now, you could practically file on a napkin yourself!

HA! Back to reality…  

The Federal Tax Cuts and Jobs Act (TCJA) of 2017 eliminated some itemized deductions, capped a few that remained and nearly doubled the Standard Deduction to $24,000 for joint taxpayers ($12,000 for individual filers).  However, it did not make your tax filing any simpler than it was before.  As a matter of fact, a new complication is the ability to itemize on your California tax filings despite taking the Standard Deduction federally.

California did not alter its own tax code as a result of new federal tax laws. As long as your total California itemized deductions exceeds the modest California standard deduction of $8802 for joint taxpayers ($4401 for single filers), you benefit from itemized deductions.  This has not changed. 

Further, since the California tax code remains unchanged, some miscellaneous tax deductions that were eliminated federally by the TCJA, remain deductible on your California filing.  Investment management fees, tax preparation fees and unreimbursed employee expenses, for example, remain deductible on your California filing. 

Also, newly capped itemized deductions at the federal level such as a $10,000 limit for property taxes paid, experience no such limitation in California.  California income taxes paid were never deductible in California, so nothing changes there.

In the end, despite less federal tax incentive to donate, utilize mortgage debt, pay for tax and/or financial advice (among the other itemized deductions removed from the federal code) for some, the approach is the same.  Continue tracking potential itemized deductions the way you always have, and pay your accountant’s bill with pride. With countless new Forms, schedules, software updates and the surprise of many Americans around the amount due at tax time, they’ve earned it!

Dustin J. Smith, CFP®    

This is not intended to be tax advice, but purely educational. Please consult your tax professional about your personal tax situation. 

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