Individual tax planning should always include state taxes, and California taxes differ from federal taxes in many ways. For example, you will have to pay taxes in California on some types of income that are not taxed at federal levels such as foreign earned income. Interest earned on municipal or state bonds from outside California is also taxable.
California also does not allow several common federal deductions such as contributions to health savings accounts, adoption expenses, estate taxes, educator expenses, and paid state, local, or foregin income taxes. California filers can’t increase their standard deduction for property taxes or disaster losses.
Some deductions you can take include interest on loans from utility companies for energy-efficient upgrades, federal mortgage interest credit if you qualified for it on your federal return, or certain medical expenses.
Knowing the differences between state tax planning and mitigating federal taxes is an important distinction, and there’s no substitute for sound advice from a trained tax professional. If you have any questions about your 2019 federal or state taxes, call GJR Consulting today.