Self-Employment Tax Deduction – California does not conform to federal tax law
The federal 2010 Tax Relief Act increased the amount of self-employment tax that may be deducted in computing federal adjusted gross income. California has not conformed to this change. For state income tax purposes, taxpayers may only deduct 50 percent (50%) of the self-employment tax paid in computing state adjusted gross income.
Make sure your tax preparation software allows for the Schedule CA line 27 adjustment if necessary. The following example shows how to compute this deduction:
Self-Employment Taxes Paid, Form 1040 line 56(or 1040NR line 54) $2,000
Federal Deduction Allowed, Form 1040/1040NR, line 27 $1,150
Less: California Deduction Allowed, 50% of self-employment taxes paid $1,000
Schedule CA, line 27 (column b) adjustment $ 150
Source: Self-Employment Tax Franchise Tax Board Announcement
Legal Division Guidance 2012-02-01.