State Tax Problems

Answers to the Top 5 CA State Tax Questions

by
Jon Osborn
on
5/25/2023
Answers to the Top 5 CA State Tax Questions

While the Internal Revenue Service (IRS) sets tax standards for American taxpayers at the federal level, each state has its own tax regulations. California, with a 2021 population of 39.24 million, is the most populous state in the union.

This means there is the potential for a lot of people to have state tax questions.

Understanding California state taxes can be a complicated tax. The intricacies of the tax system, coupled with ever-changing legislation, can leave taxpayers with numerous questions. Here, we will answer the top five commonly asked tax questions in California. Whether you're a lifelong California resident or planning an upcoming move to the Golden State, read on to find tax answers that will make life easier for you.

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Credit: Getty Images

What are the basics of filing California state taxes?

There are a are a few key factors every California resident should consider before filing a state income tax return. First, determine your residency status. If you are legally classified as a resident of California, you are generally subject to taxation on all income, regardless of the state in which it was earned.

Furthermore, be aware of the different tax brackets that apply to Californians. Your tax rate has a huge impact on how much money you ultimately owe to the state. Additionally, keep track of any state tax credits and deductions for which you may be eligible.

Your CPA can take a look at your finances and determine how to best reduce your tax liability.

How does California taxation of investment income work?

California investment income, including dividends, interest, and capital gains, are taxable. The income is generally taxed at the same rate as other sources of income. However, there are certain provisions that may allow for reduced tax rates on certain types of investment income. For instance, qualified dividends may be eligible for the lower long-term capital gains tax rate. You can talk to your tax professional or visit the California Franchise Tax Board website to better understand these concepts.

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Credit: Getty Images

Are there tax credits and deductions specific to California residents?

In short, the answer to this question is yes. There are several tax credits and deductions available to California residents – but it is important to understand that you may not qualify for all of them. The California Earned Income Tax Credit (CalEITC), for example, is quite popular. However, it provides assistance to low-income individuals and families, so there is an income threshold.

The Child and Dependent Care Expenses Credit is also popular among California households. This is designed to help offset the cost of child care. Additionally, California offers deductions for contributions made to state-sponsored college savings plans (like 529 plans) and various healthcare-related deductions.

What are the tax implications of selling real estate in California?

Selling real estate in California may have tax implications. If you sell a property for a profit, you may be subject to California state capital gains tax. The tax rate is generally the same as the ordinary income tax rate. However, certain exclusions, such as the homeowner's exclusion or the exclusion for the sale of a primary residence, may apply under specific circumstances. It is advisable to consult a tax professional to determine the tax consequences of selling residential or commercial real estate in California.

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Credit: David Sucsy / dszc / Getty Images

What are the consequences of not paying California state taxes?

Failing to pay California state taxes can result in various consequences. The California Franchise Tax Board has the authority to impose penalties and interest on unpaid taxes, for instance. Additionally, in certain cases, the state may issue a tax lien or levy in order to recover unpaid funds. A tax resolution specialist an assist you if you are facing tax trouble.

Navigating California state taxes can be challenging, but having answers to common tax questions can help you feel more confident. Remember, seeking advice from a tax professional is always recommended to ensure that you are fully compliant with California state tax laws. Stay informed, keep records, and stay ahead of your tax responsibilities.

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Jon Osborn

Jon Osborn

Steward Financial Services
38 reviews

California

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