Avoid These 3 Mistakes When Filing Your California Taxes

Tax season is upon us, and Californians have an extra level of tax that they have to pay: California state income tax. Unless you have a really high income (almost $700,000 for a single person), you won't have to pay California's top tax rate of 12.30%. But every California taxpayer needs to watch out for a few big mistakes to avoid on California income tax returns.

Let's look at a few of the biggest California tax mistakes -- and how you can have a more laid-back tax season.

Mistake No. 1: Assuming you'll get the same federal deductions

If this is your first time filing taxes in California, you might be surprised to discover that so many of the tax breaks you take for granted on your federal return aren't accepted by California. This can cause your California taxable income to be higher than your federal taxable income. In some important ways, the California tax authorities are more strict than the IRS.

Here are a few big differences between federal tax deductions and what California allows.

California has a lower standard deduction

The IRS allows for a much bigger standard deduction than California does. For example, while the federal standard deduction for married couples filing jointly is $27,700 for 2023, in California those couples can only take a standard deduction of $10,726. That's a difference of $16,974!

California doesn't allow deductions for health savings accounts (HSAs)

Putting money into a health savings account (HSA) is one of the best federal tax deductions you can get, because it's an "above the line" deduction and there are no income limits. But your HSA won't save you money on California taxes -- California doesn't allow any deductions for HSA contributions.

California doesn't allow deductions of state, local, or property taxes

If you take itemized deductions on your federal tax return, you're probably familiar with the SALT deduction for up to $10,000 of state and local taxes. This is a favorite tax break for homeowners in higher-tax states because it lets homeowners deduct some (or all) of their property taxes from their federal income.

California doesn't allow this deduction, either. Sorry, but if you have a big, expensive home with high property taxes, you won't get a California state tax break.

California has some special deductions that the feds don't allow

California is not completely ungenerous to taxpayers. There are a few types of tax deductions where California actually offers higher limits and bigger benefits compared to the IRS. For example:

• Home mortgage interest: Californians can deduct interest on mortgages up to $1 million (the federal limit is $750,000).
• Moving expenses: Anyone in California can deduct moving expenses from their state tax return; the Feds only allow some military service members to do this.
• Miscellaneous deductions: If you have to shell out money for certain expenses related to your job, California will let you deduct those costs -- and certain other miscellaneous expenses -- for amounts over 2% of your federal adjusted gross income (AGI).

Note: In California, home mortgage interest and miscellaneous deductions can only be taken if you itemize deductions at the state level.

Mistake No. 2: Trying to get tax credits that you don't qualify for

Another big mistake on California taxes is assuming you qualify for certain tax credits that are limited by income. California offers several unique tax credits for people in various life stages, but unless your income is below a certain level, you cannot get them. Here are a few to note.

• Young Child Tax Credit: You must have a qualifying child under age 6, and your earned income must be $30,931 or less.
• Nonrefundable renter's credit: Your income must be $50,746 or less for single filers, or $101,492 or less for couples filing jointly, or head of household.
• Senior head of household credit: Older adults (age 65) who are recently widowed can get this tax credit, but only if your income is less than $92,719.

Mistake No. 3: Failing to pay taxes owed by April 15, 2024

California is surprisingly laid-back about tax filing deadlines. Everyone in California gets an automatic six-month deadline extension for filing their state taxes -- you don't have to file your 2023 California tax return until Oct. 15, 2024. That's right! You don't need permission, you don't need to fill out any forms; you can just wait until October if you want.

However, if you owe taxes for 2023, if you didn't have enough money withheld from your paycheck, if something has changed in your personal finances that has caused you to owe more money to the state of California than you had expected? You must pay your 2023 California tax bill by April 15, 2024. Paying your taxes in full and on time feels good, and it helps you avoid fees and penalties.

Bottom line

Filing a tax return can be intimidating and stressful, so why not get some help in your corner? Higher-income Californians, small business owners, or people with unusually complicated tax situations might want to hire professional tax help.

But for most everyday Californians who are nowhere near the top tax bracket, the best tax software can help you file your federal and state tax returns easily and cost-effectively. California has some good deductions and credits that you won't want to miss -- tax software can help you make sure you only pay what you owe and get every California tax break you deserve.