How to Deduct Contributions to a Traditional IRA on a California Return for Married Filing Jointly
Contributions to a traditional IRA, or individual retirement account, present an avenue for a married couple to save for retirement, as well as enjoy deferred tax benefits for contributions made to the account. In addition to a federal tax deduction, you and your spouse may take a California state tax deduction for contributions you make to your retirement account each year until you reach age 70 1/2. At that time, you’ll owe state and federal income taxes on the distributions you take from your original contributions and account earnings.
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Instructions
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Calculate your total traditional IRA contributions for the tax year. You may include contributions you make to your retirement account between January 1 of the previous tax year and leading up to your California tax-filing due date.
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Input the total of your contributions in Section B of Schedule CA (540) on the line that asks for your IRA deduction. Because California abides by the same IRA contribution deduction limitations as the federal government, you may only deduct up to $5,000 of contributions you make to a traditional IRA in a given tax year. An exception applies if you are over age 50, during which time you may deduct up to $6,000 for qualified IRA contributions. You may only take the deduction to the extent of your contributions.
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Attach your Schedule CA (540) to your California State Income Tax Form 540. Complete the Form 540, being sure to include both your and your spouse’s names and Social Security numbers. Mark the “Married/RDP filing jointly” box in the section requesting your filing status before submitting the two forms to the California Franchise Tax Board.
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Tips & Warnings
If you make a qualified contribution to your traditional IRA between January 1 and the state tax-filing due date, you must formally designate which tax year you wish the contribution to apply to by notifying your IRA sponsor. If you fail to notify your sponsor of an IRA contribution designation for the prior tax year, your contribution may apply to the tax year in which you deposit it. You must use the tax deduction for federal and California state income taxes in the same tax year.
If the contributions you make to your IRA for the tax year exceed your income for that year, you may only take a deduction for the amount of your contributions that equal your income.
