Q. I'm a resident of California, so I need to file both a federal & California return. I am also self-employed, and don't understand the adjustment CA is requesting for the deductible part of self-employment taxes. Can you help explain this?
A. CA did not conform to the extra deduction allowed for self employment taxes on the federal return. Prior to this year, you were able to take a deduction of one half of the self employment taxes paid on page one of Form 1040. Currently, the federal deduction allowed is 57.51% of self employment taxes due. CA, however, only allows the deduction for 50% of self employment taxes due. Therefore, the difference must be added back to CA taxable income on Form 540 Schedule CA line 27.