What’s New

Wildfire Relief Payment – For taxable years beginning after December 31, 2019, and before January 1, 2026, the Federal Disaster Tax Relief Act of 2023 allows an exclusion from gross income for any amount received by an individual as a qualified wildfire relief payment. Generally, California law does not conform. If any qualified amount was excluded from income for federal purposes and California law provides no similar exclusion, include that amount in income for California purposes. For more information, see Schedule CA (540), California Adjustments – Residents, specific line instructions in Part I, Section B, line 8z. For specific wildfire relief payments excluded for California purposes, see General Information .

Net Operating Loss Suspension – For taxable years beginning on or after January 1, 2024, and before January 1, 2027, California has suspended the net operating loss (NOL) carryover deduction. Taxpayers may continue to compute and carryover an NOL during the suspension period. However , taxpayers with net business income or modified adjusted gross income of less than $1,000,000 or with disaster loss carryovers are not affected by the NOL suspension rules.

The carryover period for suspended losses is extended by:

Three years for losses incurred in taxable years beginning before January 1, 2024.

Two years for losses incurred in taxable years beginning on or after January 1, 2024, and before January 1, 2025.

One year for losses incurred in taxable years beginning on or after January 1, 2025, and before January 1, 2026.

For more information, see California Revenue and Taxation Code (R&TC) Section 17276.24, and get form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Individuals, Estates, and Trusts.

Special Rules for Certain Distributions from Qualified IRC Section 529 Tuition Plans – The federal Consolidated Appropriations Act (CAA), 2023, allows qualified Internal Revenue Code (IRC) Section 529 tuition plans that have been maintained for 15 years to rollover to a Roth Individual Retirement Arrangement (IRA) without a tax or penalty. Under the federal law, rollover distributions from an IRC Section 529 plan to a Roth IRA after December 31, 2023, will be treated in the same manner as the earnings and contributions of a Roth IRA. California law does not conform to this federal provision. Rollover distribution from an IRC Section 529 plan to a Roth IRA is includible in California taxable income and subject to an additional tax of 2½%. For more information, see Schedule CA (540) specific line instructions in Part I, Section B, line 8z.

Catch-Up Contributions for Certain Individuals – For taxable years beginning on or after January 1, 2024, the federal CAA, 2023, provides for the indexing for the $1,000 catch-up contribution to an IRA for individuals age 50 or older. The CAA, 2023, also increases certain contribution amounts, including catch-up contributions for individuals age 50 or over as defined in IRC Section 414(v). California law does not conform to these federal provisions. Any amount contributed that exceeds the contribution amount allowed for California may need to be included in income for California purposes. Any distribution from contributions in excess of the California limit may become taxable when distributed. For more information, see Schedule CA (540) specific line instructions in Part I, Section C, line 20.

Wildfire Mitigation Payment – For taxable years beginning on or after January 1, 2024, and before January 1, 2029, California law allows a qualified taxpayer an exclusion from gross income for any amount received as a California qualified wildfire loss mitigation payment through the California Wildfire Mitigation Financial Assistance Program. For more information, see Schedule CA (540) specific line instructions in Part I, Section B, line 8z and R&TC Section 17138.8.