California state taxes: Do I deduct $3,000 capital loss from income

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yosemite_mountain
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California state taxes: Do I deduct $3,000 capital loss from income

Post by yosemite_mountain »

From the Bogleheads wiki:

"The capital loss is valuable in several ways. Before you pay any capital gains taxes each year, you use your capital losses to offset any capital gains. If you have more losses than gains, you must apply up to $3,000 of your remaining capital losses against your regular income"

Question:
Does this apply to California state taxes as well? When doing my California taxes, before paying any capital gains taxes each year, do I use my capital losses to offset any capital gains? And if I have more losses than gains, do I apply up to $3,000 of remaining capital losses against my regular income?"
Last edited by yosemite_mountain on Mon May 10, 2021 10:20 pm, edited 1 time in total.
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CAsage
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by CAsage »

In my experience, deducting the capital losses from capital gains and then taking the $3,000 loss against income on my federal 1040, the resulting AGI drops right into my CA 540 return. In other words, the capital loss taken on your federal return does benefit you by lowering your income which just teleports magically (at least, using tax software) into the state return. Your answer is "yes' but you don't deduct it a second time. I think there are possibly exceptions on the Schedule CA of which I know nothing....
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yosemite_mountain
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by yosemite_mountain »

CAsage wrote: Mon May 10, 2021 2:28 pm In my experience, deducting the capital losses from capital gains and then taking the $3,000 loss against income on my federal 1040, the resulting AGI drops right into my CA 540 return. In other words, the capital loss taken on your federal return does benefit you by lowering your income which just teleports magically (at least, using tax software) into the state return. Your answer is "yes' but you don't deduct it a second time. I think there are possibly exceptions on the Schedule CA of which I know nothing....
In my tax software, the $3000 loss against income taken on my federal return teleports to my CA return... BUT I wanted to double check that this is correct; but cant seem to find information online.
Hyperchicken
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by Hyperchicken »

The magic of teleportation happens in CA form 540, line 13 - Enter federal adjusted gross income from federal Form 1040 or 1040-SR, line 11. And on the form 1040, line 11 is after you apply gains/losses from schedule D.
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CAsage
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by CAsage »

There's probably some high falutin' text somewhere about how California tax law follows federal with the following exceptions bleh bleh. Stuff like interest, dividends, capital gains generally follows = though treasure interest, CA muni bonds, Social security come to mind as different. All good!
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Thesaints
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by Thesaints »

Schedule CA(540) line 7. Capital losses usually apply to CA state returns.
Hyperchicken
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by Hyperchicken »

Thesaints wrote: Mon May 10, 2021 2:51 pm Schedule CA(540) line 7. Capital losses usually apply to CA state returns.
https://www.ftb.ca.gov/forms/2020/2020-540-ca.pdf
7 Unemployment compensation
Did you mean some other line?
Thesaints
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by Thesaints »

No. Line 7 in part I section A: capital gains and losses
stan1
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by stan1 »

Just to add it is important to review your carry forward loss worksheets for consistency between federal and CA state. They are usually the same, but not always.
Hyperchicken
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by Hyperchicken »

Thesaints wrote: Mon May 10, 2021 4:39 pm No. Line 7 in part I section A: capital gains and losses
I see now - my bad, I jumped over that section.

However, you only need to use schedule CA when there is a difference between federal and state capital gains/losses.

For a straight-up capital loss carryover, there is no need for schedule CA.
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yosemite_mountain
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by yosemite_mountain »

Cool.

This $3000 capital loss deduction from income saved me some $.

$1050 saved on federal taxes (Federal marginal tax rate: 35%)

$309 saved on CA state taxes (CA marginal tax rate: 10.3%)

Doesn't move the needle much on state taxes; but I'll take savings on taxes any day! :beer
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grabiner
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by grabiner »

CA follows the federal rules for capital losses (unless you have a different CA gain or loss for some reason, such as a capital gain in an HSA).

Many other states do not; check with the state tax instructions for any state in which you file taxes. For example, AL allows all capital losses to be deducted against ordinary income, while NJ allows no carryovers and thus any capital loss not offset by a gain in the same year is wasted.
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yosemite_mountain
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by yosemite_mountain »

grabiner wrote: Mon May 10, 2021 9:10 pm For example, AL allows all capital losses to be deducted against ordinary income,
Thats awesome!
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yosemite_mountain
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Re: California sate taxes: Do I deduct $3,000 capital loss from income

Post by yosemite_mountain »

grabiner wrote: Mon May 10, 2021 9:10 pm while NJ allows no carryovers and thus any capital loss not offset by a gain in the same year is wasted.
If I leave California I plan on moving to a state with no state taxes; so hopefully I won't have to worry about this.
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