California Pension and Annuity Guidelines

Pension and Annuity Guidelines
2023 FTB Publication 1005, Pension and Annuity Guidelines
1005

FTB Publication

2023
Pension and Annuity
Guidelines

Table of Contents
What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Important Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Terms Used in this Publication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Figuring Your ­California Pension, Annuity, and IRA Amounts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Social Security and Railroad Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Three-Year Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
­California Residents Receiving an Out-of-State Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Nonresidents of California Receiving a California Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Individual Retirement Arrangements (IRAs)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
  IRA Deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
  IRA Distribution  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
  Coverdell Education Savings Accounts (ESAs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
  Expanded Use of IRC Section 529 Accounts Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
  Archer Medical Savings Accounts (MSAs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
  Health Savings Accounts (HSAs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
  California Achieving a Better Life Experience (ABLE) Accounts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
  Roth IRA  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
  Roth IRA Worksheet  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
Simplified Employee Pension (SEP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
Self-Employed Retirement Plans (Keoghs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
Lump-Sum Distribution  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
Change in Residency  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
Tax on Early Distributions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
Basis Worksheets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
General Phone Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

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Page 2  FTB Pub. 1005  2023

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2023 Pension and Annuity Guidelines
What’s New
Federal Consolidated Appropriations Act (CAA), 2023 –
The CAA, 2023, was enacted on December 29, 2022, and it
includes the federal Setting Every Community Up for Retirement
Enhancement (SECURE) 2.0 Act of 2022. In general, California
Revenue and Taxation Code (R&TC) conforms to the changes
to the retirement provisions under the SECURE 2.0 Act. For
more general information, refer to the federal act and California
R&TC.

General Information
California law conforms to certain provisions of the Internal
Revenue Code (IRC) related to pension plans and deferred
compensation, including amendments to the IRC that may be
enacted in the future.
SECURE Act – The federal SECURE Act was enacted on
December 20, 2019. In general, California R&TC does not
conform to the changes. California taxpayers continue to
follow the IRC as of the specified date of January 1, 2015, with
modifications. California law does not conform to the federal
provision that repealed the maximum age of 70½ for traditional
individual retirement arrangement (IRA) contributions. For more
information, refer to the federal act and California R&TC.
Coronavirus Aid, Relief, and Economic Security (CARES)
Act – The federal CARES Act was enacted on March 27, 2020.
In general, California R&TC does not conform to the changes.
California taxpayers continue to follow the IRC as of the
specified date of January 1, 2015, with modifications. For more
information, refer to the federal act and California R&TC.
Consolidated Appropriations Act (CAA), 2021 –The federal
CAA, 2021, was enacted on December 27, 2020. In general,
California R&TC does not conform to the changes. California
taxpayers continue to follow the IRC as of the specified date
of January 1, 2015, with modifications. California law does not
conform to the federal provision that allows disaster-related
plan loans for qualified individuals. California law conforms to
the federal provision that amends the minimum age for certain
multiemployer plans for individuals who were participants in
the plan on or before April 30, 2013, and for distributions made
before, on, or after December 27, 2020. For more information,
refer to the federal act and California R&TC.
American Rescue Plan Act (ARPA) of 2021 – The federal
ARPA of 2021 was enacted on March 11, 2021. In general,
California law conforms to the changes to the retirement
provisions under the ARPA. For more information, refer to the
federal act and California R&TC.
Expanded Definition of Qualified Higher Education
Expenses – For taxable years beginning on or after
January 1, 2021, California law conforms to the expanded
definition of qualified higher education expenses associated
with participation in a registered apprenticeship program and
payment on the principal or interest of a qualified education
loan under the federal Further Consolidated Appropriations
Act, 2020.
The above lists are not intended to be all-inclusive of the federal
and state conformities and differences. For more information,
refer to the R&TC.

Retirement Income – Federal law prohibits states from taxing
the r­ etirement income of nonresidents. It also includes a
prohibition on taxing retirement income paid by a partnership to
a nonresident retired partner under any written plan, program,
or arrangement in effect immediately before retirement begins.
California does not impose tax on retirement income received
by a nonresident after December 31, 1995. This includes military
pensions, Individual Retirement Arrangement (IRA) distributions,
Roth IRA conversions, Roth IRA distributions, Simplified
Employee Pension (SEP), and self-employed retirement plans
(Keoghs).

Introduction
This publication provides information on the ­California tax
treatment of the distributions you receive from your pension
plans, annuity plans, or IRAs, and how to report these amounts
on your C
­ alifornia income tax return.
The C
­ alifornia treatment of pensions, annuities, and IRAs is
generally the same as the federal treatment of such income.
However, there are some differences between C
­ alifornia and
federal law that may cause the amount of your C
­ alifornia
distribution income to be different than the amount reported for
federal purposes. This publication identifies the most common
differences and explains how to report these differences on your
­California tax return.

Important Reminders
California generally conforms to federal law. The ­California
treatment of pension and annuity income is generally the same
as the federal treatment. For example, C
­ alifornia and federal law
are the same regarding:
•	 The “General Rule.”
•	 The “Simplified General Rule” (sometimes called the “Safe
Harbor Method”).
•	 IRA rollovers.
•	 Roth IRAs.
•	 Archer Medical Savings Accounts (MSAs).
•	 Coverdell Education Savings Accounts (ESAs).
•	 Current-year IRA deductions.
•	 Lump-sum credit received by federal employees.
•	 California Achieving a Better Life Experience (ABLE)
accounts.
Differences between C
­ alifornia and federal law. There are
differences between C
­ alifornia and federal law for:
•	 Social security and railroad retirement benefits.
•	 Retirees using the “Three-Year Rule” whose annuity date was
after July 1, 1986, and before January 1, 1987.
•	 Some prior-year IRA deductions.
•	 Health Savings Accounts (HSAs).
Pensions invested in U.S. Government Securities. If your
pension plan invested in U.S. Government securities or in
mutual funds that invested in U.S. Government securities, you
may not reduce the taxable portion of your pension distribution
by the amount of interest attributable to the U.S. Government
securities.

FTB Pub. 1005  2023  Page 3

Common Terms Used in this
Publication
AGI	
­California Adjustment	

Adjusted Gross Income
An adjustment to your federal
adjusted gross income (an addition
or subtraction) to arrive at your
­California AGI
Form 540	­California Resident Income Tax
Return
Form 540NR	­California Nonresident or Part-Year
Resident Income Tax Return
Schedule CA (540) 	­California Adjustments — ­Residents
Schedule CA (540NR) 	­California Adjustments —
Nonresidents or Part-Year Residents
Traditional IRA	
Any IRA that is not a Roth IRA or
SIMPLE IRA

Figuring Your ­California
Pension, Annuity, and IRA
Amounts
Complete your federal tax return before starting your ­California
tax return. If you need information on how to report your
pension, annuity, or IRA income on your federal tax return, refer
to federal forms, instructions, and publications.
Once you have completed your federal tax return, compute the
­California amounts of your pension, annuity, or IRA income. If
the ­California amount is different than the federal amount, you
will need to make a ­California adjustment.* Depending on the
­California form you file, report your ­California adjustment on one
of the ­following forms:
•	 Schedule CA (540) for Form 540 filers.
•	 Schedule CA (540NR) for Form 540NR filers.
*A ­California adjustment is an addition to or subtraction from
your ­federal AGI. Your federal pension, annuity, or IRA income is
­included in the federal AGI figure that you list on your ­California
tax return (Form 540 or 540NR, line 13).
Maximum Contribution Amounts to Traditional and Roth
IRAs. Taxpayers may contribute the following amounts to a
traditional and/or Roth IRA:
Age

2019

2020

2021

2022

2023

$6,000

$6,000

$6,000

$6,000

$6,500

$7,000

50 & Over $7,000

$7,000

$7,000

$7,000

$7,500

$8,000

Under 50

2024

Maximum Contribution Amounts to 401(k), 403(b), and 457
Plans. Taxpayers may contribute the following amounts to a
deferred compensation plan:
Age
2019
2020
2021
2022
2023
Under 50 $19,000 $19,500 $19,500 $20,500 $22,500
50 & Over $25,000 $26,000 $26,000 $27,000 $30,000

2024
$23,000
$30,500

Maximum Contribution Amounts to Savings Incentive
Match Plan for Employees (SIMPLE). Taxpayers may contribute
the following amounts to a Simple IRA and Simple 401(k):
Age
2019
2020
2021
2022
2023
Under 50 $13,000 $13,500 $13,500 $14,000 $15,500
50 & Over $16,000 $16,500 $16,500 $17,000 $19,000

Page 4  FTB Pub. 1005  2023

2024
$16,000
$19,500

Maximum Contribution Amounts to Keogh. The maximum
contribution amount a taxpayer can make to a Keogh plan per
year is as follows:
•	 2024, the amount is $69,000
•	 2023, the amount is $66,000
•	 2022, the amount is $61,000
•	 2021, the amount is $58,000
•	 2020, the amount is $57,000
•	 2019, the amount is $56,000
Maximum Deduction and Contribution Amounts to a
­Simplified Employee Pension (SEP). The maximum deduction
and contribution amounts per plan year to an SEP are as
follows:
•	 2024, the lesser of $69,000 or 25% of compensation
(compensation is limited to $345,000)
•	 2023, the lesser of $66,000 or 25% of compensation
(compensation is limited to $330,000)
•	 2022, the lesser of $61,000 or 25% of compensation
(compensation is limited to $305,000)
•	 2021, the lesser of $58,000 or 25% of compensation
(compensation is limited to $290,000)
•	 2020, the lesser of $57,000 or 25% of compensation
(compensation is limited to $285,000)
•	 2019, the lesser of $56,000 or 25% of compensation
(compensation is limited to $280,000)
Rollovers. Section 457 plans can be rolled over to other
qualified plans. In addition, distributions from a Section 457 plan
can be used to purchase permissive service credit for other
retirement plans.
A surviving spouse can roll over distributions from a deceased
spouse’s qualified retirement plan to a Section 457 plan in which
the surviving spouse participates.

Social Security and Railroad
Retirement Benefits
­ alifornia law differs from federal law in that ­California does not
C
tax:
•	 Social security benefits.
•	 Tier 1 railroad retirement benefits.
•	 Tier 2 railroad retirement benefits reported on federal
Form RRB-1099-R, Annuities or Pensions by the Railroad
Retirement Board.**
•	 Sick pay benefits under the federal Railroad Unemployment
Insurance Act.
Make an adjustment to exclude any of this income if it
was included in your federal AGI. See the instructions for
Schedule CA (540), Part I or Schedule CA (540NR), Part II,
Section A, lines 1z, 5a, 5b, and 6b, for more information.
The information listed applies only to United States social
security and railroad retirement. Foreign social security is
taxable by California as annuity income. A tax treaty between
the United States and another country which e
­ xcludes the
foreign social security from federal income or which treats the
foreign social security as if it were United States social security
does not apply for California purposes.
** Railroad benefits paid by individual railroads are taxable by
California. These benefits are reported on federal Form 1099-R,
Distributions From Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

Three-Year Rule
The “Three-Year Rule” was repealed for retirees whose annuity
starting date is after December 31, 1986. However, if your
annuity starting date was before January 1, 1987, and you
elected to use the “Three-Year Rule,” continue to use this
method.
Under the “Three-Year Rule,” amounts you receive are not
taxed until your after-tax contributions are recovered. Once your
contributions are recovered, your pension or annuity is fully
taxable.
Generally, the ­California and federal taxable amounts are
the same. If the California and federal taxable amounts are
different, enter the difference on Schedule CA (540), Part I, or
Schedule CA (540NR), Part II, Section A, line 5b, column C.

California Residents Receiving
an Out-of-State Pension
In General

­ alifornia residents are taxed on ALL income, including
C
income from sources outside ­California. Therefore, a pension
attributable to services performed outside ­California but
received after you became a ­California resident is taxable in its
entirety by ­California. See Examples 1 through 4.
Examples:
Example 1 – You worked 10 years in Texas, moved to ­California
and worked an additional 5 years for the same company. You
retired in C
­ alifornia and began receiving your pension, which is
attributable to your services performed in both ­California and
Texas.
Determination: You are a full-year resident of ­California. As a
­California resident, you are taxed on all your income, regardless
of its source. Do not make an adjustment on Schedule CA (540)
to exclude any of the pension income.
Example 2 – You worked in New York for 20 years. You retired
and moved permanently to C
­ alifornia on January 1. While living
in ­California, you begin receiving your pension attributable to the
services performed in New York.
Determination: You are a full-year resident of ­California. As a
­California resident, you are taxed on all your income, regardless
of its source. Do not make an adjustment on Schedule CA (540)
to exclude any of the pension income.
Example 3 – In December 2022, you retired and moved
permanently to ­California. Prior to your move, you elected to
receive your pension as a lump-sum distribution. Your pension
is attributable solely to services you performed in Washington
prior to your move. You received the lump-sum distribution in
February 2023, after you became a ­California resident.
Determination: You are a full-year ­California resident in 2023. As
a ­California resident, you are taxed on all income, regardless of
its source. Do not make an adjustment on Schedule CA (540) to
exclude any portion of the Washington pension income.
Example 4 – You worked in Georgia for 20 years. You retired
and began receiving your monthly pension on January 1, 2023,
while you were still living in Georgia. Your pension is $2,000 a
month. Because you did not contribute to the plan, your pension
is fully taxable. On May 1, 2023, you moved permanently to
­California.

Determination: You are a part-year resident of ­California.
While you are a nonresident, only your C
­ alifornia-source
income is taxable by C
­ alifornia. While you are a resident,
all of your income, regardless of its source, is taxable by
­California. Because your pension is attributable to services
you performed in Georgia, your pension has a Georgia source.
None of the pension received while you were a nonresident
of C
­ alifornia is taxable by ­California. However, the pension
received during the period that you are a C
­ alifornia resident
(May 1 through December 31) is taxable by C
­ alifornia.
Therefore, $16,000 ($2,000 x 8 months) is the taxable portion
of the pension to enter on Schedule CA (540NR), Part II,
Section A, line 5b, column E. Do not make an adjustment on
Schedule CA (540NR), column B, to exclude any of the Georgia
pension income.

Military Pension
If you are a C
­ alifornia resident, your military pension is taxable
by ­California, regardless of where the service was performed.

Nonresidents of C
­ alifornia
Receiving a C
­ alifornia Pension
In General
­ alifornia does not impose tax on retirement income received
C
by a nonresident after December 31, 1995. For this purpose,
retirement income means any income from any of the following:
•	 A qualified plan described in IRC Section 401.
•	 A qualified annuity plan described in IRC Section 403(a).
•	 A tax-sheltered annuity described in IRC Section 403(b).
•	 A governmental plan described in IRC Section 414(d).
•	 A deferred compensation plan maintained by a state or local
government or an exempt organization described in IRC
Section 457.
•	 An IRA described in IRC Section 7701(a)(37), including Roth
IRA and SIMPLE.
•	 A simplified employee pension described in IRC
Section 408(k).
•	 A trust described in IRC Section 501(c)(18).
•	 A military pension, even if the military service was performed
in California.
•	 A private deferred compensation plan program or
arrangement described in IRC Section 3121(v)(2)(C) only if
the income is either of the following:
1.	 Part of a series of substantially equal periodic payments
(not less frequently than annually) made over the life
or life expectancy of the participant or those of the
participant and the designated beneficiary or a period of
not less than 10 years.
2.	 A payment received after termination of employment
under a plan program or arrangement maintained solely
to provide retirement benefits for employees in excess of
the limitations on contributions or benefits imposed by the
IRC.
•	 Any retirement or retainer pay received by a member or
former member of a uniform service computed under
Chapter 71 of Title 10, United States Code.

FTB Pub. 1005  2023  Page 5

Individual Retirement
Arrangements (IRAs)

2002 through 2004

The ­California treatment of IRAs is generally the same as the
federal treatment. For information on the federal treatment
of IRAs, get federal Pub. 590-A, Contributions to Individual
Retirement Arrangements (IRAs), federal Pub. 590-B,
Distributions from Individual Retirement Arrangements (IRAs),
and federal Pub. 560, Retirement Plans for Small Business
(SEP, SIMPLE, and Qualified Plans).

IRA Deduction
SECURE Act repeal of maximum age 70½
The SECURE Act repealed the maximum age of 70½ for
traditional IRA contributions. California law does not conform
to this federal provision. If you report an IRA deduction on
Schedule CA (540), Part I, or Schedule CA (540NR), Part II,
Section C, line 20, column A at age 70½ or older, include that
amount deducted for federal in the total you enter on Section C,
line 20, column B.
Limit if Covered by Employer Plan
If you are covered by an employer’s retirement plan or if you
file a joint tax return with your spouse who is covered by such
a plan, you may be entitled to only a partial deduction or no
deduction at all, depending on your income. See the federal
instructions for more information. You can elect to designate
otherwise deductible contributions as nondeductible. However,
you do not have to elect the same treatment for California
purposes that you did for federal purposes.
To take the election on the Schedule CA (540 or 540NR), the
federal deduction is taken on Section C, line 20, column A.
The election for California will be on Section C, line 20,
column B or C.
Following is a summary of the California IRA deduction allowed.
To calculate any adjustments to your IRA deduction, see
Schedule CA (540 or 540NR) instructions.

2005 through 2023

­ alifornia law is the same as federal law. For a SIMPLE IRA, an
C
elective deferral may be made for up to the amount listed in the
chart on this page. For a traditional IRA, the most that can be
contributed is the smaller of:
•	 The amount listed in the chart on this page or
•	 100% of your compensation.
IRA
Age
Under 50
50 & Over

2005
$4,000
$4,500

2006-2007
$4,000
$5,000

2008-2012
$5,000
$6,000

2013-2018
$5,500
$6,500

Age
Under 50
50 & Over

2019-2022
$6,000
$7,000

2023
$6,500
$7,500

Age
Under 50
50 & Over

2005-2006
$10,000
$12,500

2007-2008
$10,500
$13,000

2009-2012
$11,500
$14,000

2013-2014
$12,000
$14,500

Age
Under 50
50 & Over

2015-2018
$12,500
$15,500

2019
$13,000
$16,000

2020-2021
$13,500
$16,500

2022
$14,000
$17,000

Age
Under 50
50 & Over

2023
$15,500
$19,000

SIMPLE IRA

Page 6  FTB Pub. 1005  2023

California law was the same as federal law. For a SIMPLE IRA,
an elective deferral may be made for up to the amount listed
in the chart below. For a traditional IRA, the most that can be
contributed is the smaller of:
•	 The amount listed in the chart below or
•	 100% of your compensation.
Age
Under 50
50 or Older

IRA
2002 - 2004
3,000
3,500

2002
7,000
7,500

SIMPLE IRA
2003
2004
8,000
 9,000
9,000
10,500

1987 through 2001

­ alifornia law was the same as federal law. The IRA deduction
C
is the lesser of $2,000 or 100% of your compensation. For a
SIMPLE IRA, an elective deferral may be made for up to $6,500
for 2001 and $6,000 for 1997 through 2000.

1982 through 1986

­ alifornia law was different from federal law. The maximum
C
federal deduction for an individual was $2,000, and was
available to active participants in qualified or government
retirement plans and to persons who contributed to
tax‑sheltered annuities. The C
­ alifornia IRA deduction was the
lesser of $1,500 or 15% of compensation with an additional
deduction for a nonworking spouse, for a maximum deduction
of $1,750. An IRA deduction was not allowed if you were an
active participant in a qualified or government retirement plan
or contributed to a tax-sheltered annuity.

1976 through 1981

­ alifornia law was the same as federal law. The IRA
C
deduction for an individual was the lesser of $1,500 or 15% of
compensation. An IRA deduction was not allowed if you were
an active participant in a qualified or government retirement
plan or contributed to a tax‑sheltered annuity.

1975

­ alifornia law was different from federal law. ­California did not
C
allow an IRA deduction. Therefore, income earned in 1975 and
1976 on the 1975 contribution was taxable.
Differences in the amount of IRA deduction you could claim
may have occurred prior to January 1, 1996 if there was a
difference between your federal self-employment income and
your C
­ alifornia self-employment income.

Form 540NR Filers

If you file Form 540NR, your IRA deduction on
Schedule CA (540NR), Part II, Section C, line 20, column E, is
limited to the lesser of:
•	 The IRA deduction allowed on your federal tax return.
•	 The compensation reported on your Schedule CA (540NR),
column E.
Example: You are a nonresident of C
­ alifornia who is under
50 years of age. During the year, you worked temporarily in
­California. Your ­California compensation is $1,000, which you
reported on Schedule CA (540NR), column E. Your federal
compensation is $10,000. Your allowable IRA deduction on your
federal tax return is $6,500.
Determination: Your allowable ­California IRA deduction that
you report on Schedule CA (540NR), column E, is $1,000.
This is the lesser of (1) the $6,500 IRA deduction allowed on
your federal tax return, or (2) the $1,000 of compensation you
reported on S
­ chedule CA (540NR), column E.

IRA Distribution
Residents of ­California

Your IRA distribution is fully taxable if your IRA contributions
were fully deductible. If your IRA contributions were partially or
fully nondeductible, then the nondeductible contributions are not
taxed when they are distributed to you. Your basis is the amount
of your nondeductible contributions. How you recover your basis
depends on when your nondeductible contributions were made.
Nondeductible Contributions Made After 1986
If you made nondeductible contributions after 1986, a part of each
distribution is considered a return of your basis and is not taxable.
The ­California taxable amount will generally be the same as the
federal taxable amount, and you should not make an adjustment
to your federal AGI on Schedule CA (540 or 540NR).
However, if you elected to treat a contribution differently for
federal purposes than for ­California purposes, the taxable
amounts will differ. Compute the ­California taxable amount
using the instructions for federal Form 8606, Nondeductible
IRAs. When making this computation for the recovery of
nondeductible contributions made after 1987, make sure you
do not include nondeductible contributions made before 1987.
The nondeductible contributions made before 1987 will be
recovered as explained in the following paragraph.
Compute the adjustment to federal AGI by comparing your
federal taxable amount with the ­California taxable amount.
•	 If the federal amount is more than the C
­ alifornia amount,
enter the difference on Schedule CA (540), Part I or
Schedule CA (540NR), Part II, Section A, line 4b, column B.
•	 If the federal amount is less than the C
­ alifornia amount,
enter the difference on Schedule CA (540), Part I or
Schedule CA (540NR), Part II, Section A, line 4b, column C.
Nondeductible Contributions Made Before 1987
If you made nondeductible contributions before 1987, none
of your distribution is taxed until you have recovered your
pre‑1987 basis. Because there was a difference between federal
and California contribution limits before 1987, there may be a
difference in the ­California and federal taxable amounts. If there
is a difference, make an adjustment to reduce your federal AGI
to the correct taxable amount for C
­ alifornia.
Your adjustment is the lesser of your pre-1987 California basis
or IRA distribution included in federal AGI.
Use Worksheet I — Part A on page 14 to compute your
pre‑1987 ­California basis. Use Worksheet I — Part B to compute
your adjustment to federal AGI and your remaining pre-1987
­California basis. See Example 1 and Example 2 on page 8. Use
Worksheet II on page 14, as a summary of your C
­ alifornia basis
and its recovery.
If you have more than one IRA account, combine all your
IRAs to complete the worksheet. If both you and your
spouse/registered domestic partner (RDP) have IRAs, you each
must complete a separate worksheet based on your own IRA
contributions, deductions, and distributions.

Nonresidents of C
­ alifornia
­ hange of Residency
C
­From resident to nonresident
For IRA distributions received while you were a California
resident, see “Residents of California” on this page for the
taxability of your distributions.
From nonresident to resident
For IRA distributions received while you were a California
resident, see “2002 Law Changes IRA Basis of Former
Nonresidents” to determine your nontaxable IRA basis.
2002 Law Changes IRA Basis of Former Nonresidents
The law changed for taxable years beginning on or after
January 1, 2002. If you are a California resident who was a
former nonresident, the new law may affect the taxation of your
IRA income. The law affects not only individuals who became
California residents in 2002, but also individuals who became
California residents prior to 2002. Under prior law, when you
became a resident, you received a stepped-up basis in your IRA
equal to your annual contributions made while a nonresident,
plus the earnings on your IRA while a nonresident. You were
allowed to carry over this IRA basis until it was fully recovered.
Beginning in 2002, you no longer have this stepped-up basis.
The law treats a former nonresident as though the individual
were a resident for all prior years for all items of deferred
income, including IRAs. Accordingly, a former nonresident will
be allowed an IRA basis only for contributions which would not
have been allowed as a deduction under California law had
the taxpayer been a California resident. For a summary of IRA
deductions allowed under California law, see “IRA Deduction” on
page 6.

FTB Pub. 1005  2023  Page 7

Do not include in California basis any rollover contributions from an employer sponsored or self-employed retirement plan, including a
tax-sheltered annuity.
If you became a California resident prior to 2002 and you have an unrecovered stepped-up IRA basis that you were carrying into 2002,
restate your IRA basis using the new law. See Example 3 and Example 4 on page 9.
Example 1 ­– You were a ­California resident in 2023, and you received an IRA distribution of $800. The only other distribution received from
your IRA was in 2022. The amount of the 2022 distribution was $700. You made the following contributions and deductions in prior years:
	
Year	
Contributions	
Federal Deductions	­California Deductions
	
1981	
$1,500	$1,500	$1,500
	
1982	
2,000	2,000	1,500
	
1983	
2,000	2,000	1,500
		

__________________	

___________________	___________________

	
Total	
$5,500	$5,500	$4,500
Worksheet I — Figuring California Basis and Adjustment to Federal AGI	
Part A  Pre-1987 C
­ alifornia Basis	
Example 1
(If you have already computed your ­California basis as of 12/31/22; skip to Part B.)
1	 Enter your total federal deductions claimed prior to 1987. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1	
$5,500
2	 Enter your total ­California deductions claimed prior to 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2	
4,500
3	 Total ­California basis. Subtract line 2 from line 1  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3	1,000
4	 Enter your ­California basis previously recovered  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4	
700
5	 ­California basis as of 12/31/22. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5	
$300
Part B  Adjustment to Federal AGI and Remaining Pre-1987 California Basis	
1	 Enter your taxable distribution from your federal Form 1040 or Form 1040-SR, line 4b (or line 5b) . . . . . . . . . . . . .  1	
2	 Enter your ­California basis as of 12/31/22 a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2	
3	 Enter the smaller of line 1 or line 2. Enter this amount on Schedule CA (540), Part I or
	 Schedule CA (540NR), Part II, Section A, line 4b or line 5b, column B  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3	
4	 Remaining C
­ alifornia basis as of 12/31/23. Subtract line 3 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4	

Example 1
$800
300
300
$0

Included in your federal AGI is the $800 IRA distribution. Only $500 ($800 – $300) of the distribution is taxable by ­California in 2023.
Your adjustment to federal AGI is $300. Your ­California basis has now been fully recovered. When you receive a distribution in later
years, the amount of the distribution taxable for federal purposes will also be the amount taxable by C
­ alifornia. No adjustment to federal
AGI will be necessary.
a) A nonresident or former nonresident will no longer receive a stepped-up basis for annual contributions and earnings attributable to periods of
nonresidency.

Example 2 ­– You were a ­California resident in 2023, and you received your first IRA distribution. The distribution was $1,000. For federal
purposes, you included $800 in income and $200 was treated as the nontaxable recovery of your federal basis. You made the following
contributions and deductions in prior years:
	
Contributions	
Federal	­California Deductions
	
Year	
Before 1987	
After 1986	
Deductions	
Before 1987	
After 1986
	
1984	$2,000		
$2,000	
$0
	 1985	2,000		
2,000	
0
	 1986	2,000		
2,000	
0
	
1987		$2,000	
0		
$0
		

__________	__________	

__________	

__________	

__________

	
Total	 $6,000	$2,000	
$6,000	
$0	
$0
Worksheet I — Figuring California Basis and Adjustment to Federal AGI	
Part A  Pre-1987 C
­ alifornia Basis  (If you have already computed your C
­ alifornia basis as of 12/31/22; skip to Part B.) 	 Example 2
1	 Enter your total federal deductions claimed prior to 1987. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1	
$6,000
2	 Enter your total ­California deductions claimed prior to 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2	
0
3	 Total ­California basis. Subtract line 2 from line 1  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3	6,000
4	 Enter your ­California basis previously recovered  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4	
0
5	 ­California basis as of 12/31/22. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5	
$6,000
Part B  Adjustment to Federal AGI and Remaining Pre-1987 California Basis	
Example 2
1	 Enter your taxable distribution from your federal Form 1040 or Form 1040-SR, line 4b (or line 5b) . . . . . . . . . . . . .  1	
$800
2	 Enter your ­California basis as of 12/31/22  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2	
6,000
3	 Enter the smaller of line 1 or line 2. Enter this amount on Schedule CA (540), Part I
	 or Schedule CA (540NR), Part II, Section A, line 4b or line 5b, column B  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3	
800
4	 Remaining C
­ alifornia basis as of 12/31/23. Subtract line 3 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4	
$5,200
Because your ­California basis is more than the distribution, none of your IRA distribution will be taxed by ­California in 2023. Your
adjustment to federal AGI is $800. You have a remaining ­California IRA basis of $5,200. You will recover your remaining C
­ alifornia basis
in later years. Use Worksheet II, on the next page, to keep track of your C
­ alifornia basis and its recovery.
Page 8  FTB Pub. 1005  2023

Worksheet II — Summary of C
­ alifornia Basis
				­California		
Federal	­California	
Remaining
	
Taxable	
Pre-1987	
Deduction	
Basis in	
Total	
Taxable	
Basis	­California
	
Year	
Contributions	
Federal	­California	 Contribution	 Distribution	
Amount	
Recovered	
Basis
	
1984	
$2,000	
$2,000	$0	$2,000				 $2,000
	
1985	 2,000	 2,000	 0	 2,000				 4,000
	
1986	 2,000	 2,000	 0	 2,000				 6,000
	
2023					
$1,000	
$800	
$800	
$5,200

Example 3 – You became a California resident on January 1, 2001. The fair market value of your IRA on January 1, 2001, was $9,000.
Your contributions in excess of California deduction limits during 1982-1986 were $2,500. You received IRA distributions of $1,500 in
2001; $3,000 in 2002; and $2,000 in 2003.
Determination:
Taxable year 2001 (prior law):
California IRA basis, January 1, 2001	
(fair market value on 1/1/01)		
$9,000
Less: IRA distribution	
					 1,500
California IRA basis, December 31, 2001						
$7,500
Taxable year 2002 (new law):
IRA distribution, 2002			
$3,000
Less:	 California IRA basis	
	
Contributions in excess of California deduction limits	
$2,500
	
Less: California IRA basis recovered in 2001	
 1,500
	
California IRA basis available in 2002		  1,000
Taxable IRA income			
$2,000
California IRA basis, December 31, 2002, is $-0-.
Taxable year 2003:
IRA distribution, 2003		
Less:	 California IRA basis available in 2003	
Taxable IRA income		

$2,000
	-0$2,000

Example 4 – You became a California resident on January 1, 2002. In 2001, while you were a nonresident of California, you received a
$50,000 lump-sum distribution from your employer’s retirement plan and rolled over the distribution to an IRA. The earnings on your IRA
in 2001 were $2,000. You received your first distribution from your IRA in 2002. The distribution was $4,000, all of which was taxable for
federal purposes. Your California basis is determined as follows:
Determination:
Taxable year 2001 (prior law):
California IRA basis, January 1, 2001	
(earnings while a nonresident)	 $2,000
Less: IRA distribution in 2001	
	
-0California IRA basis, December 31, 2001		
$2,000
Taxable year 2002 (new law):
IRA distribution:		 $4,000
Less:	 California IRA basis		
	
Contributions in excess of California deduction limits	
$ -0-	
	
Less: Basis recovered in prior years	
-0-	
	
California IRA basis		
-0Taxable IRA income		 $4,000
California IRA basis, December 31, 2002, is $-0-.
A nonresident or former nonresident will no longer receive a stepped-up basis for annual contributions and earnings attributable to
periods of nonresidency.

FTB Pub. 1005  2023  Page 9

Coverdell Education Savings
Accounts (ESAs)
Under a Coverdell ESA, contributions are not deductible,
earnings are excludable, and distributions are not taxable if
used for qualified educational expenses. In general, ­California
conforms to the federal rules regarding contribution limits,
income phaseout limits and the treatment of distributions.
Get federal Pub. 970, Tax Benefits for Education, for more
information. If you have a taxable distribution from a Coverdell
ESA, get form FTB 3805P, Additional Taxes on Qualified Plans
(Including IRAs) and Other Tax-Favored Accounts, to figure the
additional tax.

Expanded Use of IRC Section 529
Accounts Funds
California does not conform to the federal Tax Cuts and Jobs
Act (TCJA) regarding account funding for elementary and
secondary education or to the new federal rules relating to the
maximum distribution amount.

Archer Medical Savings Accounts
(MSAs)
An MSA is a tax-exempt trust or custodial account set up in
the United States exclusively for paying the qualified medical
expenses of the account holder or the account holder’s spouse
or dependent(s) in conjunction with a high deductible health
plan (HDHP). Get federal Form 8853, Archer MSAs and LongTerm Care Insurance Contracts, for more information.
Use federal Form 8853 to report general information about new
MSAs, to figure your MSA deduction, and to figure your taxable
distribution for MSAs. In general, ­California law is the same
as federal law regarding MSA contributions and deductions,
but is different regarding the amount of additional tax on MSA
distributions not used for qualified medical expenses. The
additional tax is 12.5% for ­California.
Therefore, for ­California purposes, there is no separate form to
file to report general information about new MSAs or to figure
your MSA deduction. However, if you have a taxable MSA
distribution, file form FTB 3805P.
After December 31, 2007, contributions cannot be made to an
Archer MSA for you unless either of the following applies:
•	 You were an active MSA participant before January 1, 2008.
•	 You become an active MSA participant after
December 31, 2007 because you are covered by an HDHP
of an MSA participating employer.

Health Savings Accounts (HSAs)
An HSA is a tax-exempt trust or custodial account that you
set up with a U.S. financial institution (such as a bank or an
insurance company) in which you can save money exclusively
for future medical expenses in conjunction with an HDHP.
California does not conform to federal legislation that enacted
HSAs beginning January 1, 2004.
Because California does not conform to federal legislation for
HSAs, a contribution to an HSA is not deductible. Interest and
other earnings of an HSA are not tax-deferred and must be
included in taxable income.
A rollover from an MSA to an HSA constitutes an MSA
distribution not used for qualified medical expenses. Therefore,
the distribution is subject to California income tax and the
additional 12.5% tax under R&TC Section 17215.

Page 10  FTB Pub. 1005  2023

Effective for taxable years beginning on or after January 1, 2007,
the IRS allows a one-time rollover from an IRA to an HSA.
California does not conform to this provision. Under California
law, any distribution from an IRA to an HSA must be added
to AGI on the taxpayer’s California tax return and would be
subject to a 2½% additional tax under the rules for premature
distributions under R&TC Section 17085.

California Achieving a Better Life
Experience (ABLE) Accounts
A California ABLE account is a tax-exempt trust established in
California exclusively for paying the qualified disability expenses
of the designated beneficiary. The residency requirement for a
designated beneficiary of the California Qualified ABLE Program
was expanded to include residents of the United States. Get
federal Form 5329, Additional Taxes on Qualified Plans (Including
IRAs) and Other Tax-Favored Accounts, for more information.
Federal Form 5329 is used to figure additional taxes on
tax-favored accounts for distributions not used for qualified
disability expenses. If distributions from your ABLE account
during a year are not more than your qualified disability expenses
for that year, no amount is taxable for that year. If the total amount
distributed during a year is more than your qualified disability
expenses for that year, the earnings portion of the distribution is
included in your income for that year and subject to additional tax.
California law is the same as federal law regarding distribution
rules but is different regarding the amount of additional tax on
ABLE distributions not used for qualified disability expenses.
The additional tax is 2.5% for California.
If you have a taxable distribution from an ABLE account, you
must file form FTB 3805P to figure the additional tax.
For taxable years beginning on or after January 1, 2019,
California conforms to certain provisions of the TCJA relating to
ABLE accounts. The TCJA increases the limit on contributions
made by the designated beneficiary to ABLE accounts up to the
federal poverty level and allows IRC Section 529 plan accounts
to rollover to ABLE accounts without penalty.

Roth IRA
In General
A Roth IRA is an individual retirement plan that differs from a
traditional IRA in the way contributions and distributions are
taxed. Contributions to a Roth IRA are never deductible, and, if
you meet the requirements, qualified distributions are not taxed.
California law conforms to federal law regarding Roth IRAs.
All Roth IRA transactions must be treated the same way for
California purposes as they are for federal purposes and no
California adjustment will be necessary unless you converted
a traditional IRA into a Roth IRA and the California basis of the
converted IRA was different from the federal basis. The following
paragraphs provide information about calculating the California
adjustment if one is necessary.

Roth IRA Distributions
In general, the taxable amount of your Roth IRA distribution will
be the same for California and federal purposes. However, the
taxable portion of your distribution may be different for California
purposes than for federal purposes if:
•	 You made a 1998 conversion from a traditional IRA to a Roth
IRA.
•	 You elected to report the taxable portion of the conversion
over 4 years.
•	 The federal basis of the traditional IRA was different from the
California basis.

In this case, refigure federal Form 8606, Part III, using
California amounts. Your adjustment will be the difference
between line 23 of federal Form 8606 completed with federal
amounts and line 23 of federal Form 8606 completed with
California amounts. If the:
•	 Federal amount is more than the California amount,
include the difference on Schedule CA (540), Part I or
Schedule (540NR), Part II, Section A, line 4b, column B.
•	 California amount is more than the federal amount,
include the difference on Schedule CA (540), Part I or
Schedule (540NR), Part II, Section A, line 4b, column C.

Roth IRA Worksheet

Roth IRA Conversions
The tax due as the result of a conversion may be different for
California purposes than for federal purposes if:
•	 You made a conversion from a traditional IRA to a Roth IRA.
•	 The federal basis of the traditional IRA was different from the
California basis.
Use the Roth IRA Worksheet below to figure the amount that
is taxable for California and the adjustment you must enter on
Schedule CA (540 or 540NR).

Do Not Mail This Record

xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxx

Do not file this worksheet with your tax return. Keep it for your tax records.

Conversions from Traditional IRAs to Roth IRAs
Part A – Pre-1987 ­California Basis
	1	 Enter your total federal IRA deductions claimed prior to 1987 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  1________________
	2	 Enter your total ­California IRA deductions claimed prior to 1987 (or the deductions you could have
claimed had you been a California resident) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  2________________
	3	 Total ­California pre-1987 basis. Subtract line 2 from line 1 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  3________________
	4	 Enter your pre-1987 ­California basis previously recovered  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  4________________
	5	 Pre-1987 ­California basis as of 12/31/22. Subtract line 4 from line 3  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  5________________
Part B – Post-1986 ­California Basis
	6	 Enter your total IRA contributions made after 1986. (Enter only contributions made to traditional IRAs.
Do not include contributions to Roth IRAs.) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  6________________
	 7	 Enter your total ­California IRA deductions claimed after 1986 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  7________________
	8	 Subtract line 7 from line 6  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  8________________
	9	 Enter your post-1986 California basis previously recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9________________
	10	 Total ­California post-1986 basis. Subtract line 9 from line 8. If the result is zero, skip line 11 through
line 15, enter zero on line 16, and continue to line 17  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10________________
	11	 Enter the total amount of distributions from traditional IRAs during 2023 that were converted to
Roth IRAs (as shown on line 16 of federal Form 8606) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 11________________
	12	 Enter the value of all your traditional IRAs as of 12/31/23 (include any outstanding rollovers from
traditional IRAs to other traditional IRAs) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 12________________
	13	 Enter the total distributions from traditional IRAs (including amounts converted to Roth IRAs as shown
on line 16 of federal Form 8606) received in 2023 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 13________________
	14	 Add line 12 and line 13 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14________________
	15	 Divide line 11 by line 14, and enter the result as a decimal here. Carry the decimal to at least four places  .  .  . 15 __ . __ __ __ __
	16	 Post-1986 basis recoverable against a 2023 distribution. Multiply line 10 by line 15  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 16________________
Part C – Adjustment to Federal AGI
	17	 Enter the total amount of distributions from traditional IRAs during 2023 that were converted to Roth IRAs
		 (as shown on line 16 of federal Form 8606) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 17________________
	18	 a  Enter the amount from Part A, line 5  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18a_______________
		b 
Enter the amount from Part B, line 16  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18b_______________
		c 
Add line 18a and line 18b .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18c________________
	19	 Subtract line 18c from line 17. This is the total 2023 California taxable amount
resulting from a 2023 conversion of a traditional IRA to a Roth IRA .  .  .  .  .  .  .  .  .  .  .  .  .  . 19________________
	20	 Enter the 2023 federal taxable amount of a distribution resulting from a 2023
conversion of a traditional IRA to a Roth IRA (included on Form 1040 or 1040-SR,
line 4b) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 20________________
	21	 Figure Your ­California Adjustment  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 21________________
	
If line 19 is less than line 20, subtract line 19 from line 20 and enter the result here and include it on Schedule CA (540), Part I, or
Schedule CA (540NR), Part II, Section A, line 4b, column B.
	
If line 20 is less than line 19, subtract line 20 from line 19 and enter the result here and include it on Schedule CA (540), Part I, or
Schedule CA (540NR), Part II, Section A, line 4b, column C.
Part-Year Residents. The taxable amount of a distribution from a traditional IRA (that is being converted to a Roth IRA in 2023) is
included in your California source income only if you were a resident of California on the date of the distribution.

FTB Pub. 1005  2023  Page 11

Simplified Employee Pension
(SEP)
Deduction
Beginning with taxable year 1996, the allowable ­California SEP
deduction is the same as the federal deduction.
Prior to January 1, 1996, there may have been a difference in
the amount of the SEP deduction you claimed if there was a
difference between your federal self-employment income and
your ­California self‑employment income (residents, part-year
residents, or nonresidents of C
­ alifornia).
Form 540NR filers. Your SEP deduction on
Schedule CA (540NR), column E is based upon the percentage
of self-employment income from Schedule CA (540NR),
column E to total self-employment income computed according
to ­California law on Schedule CA (540NR), column D.
Multiply the SEP deduction from Schedule CA (540NR),
column D by the ratio of ­California source self-employment
income to total self-employment income. Enter this figure on
Schedule CA (540NR), Part II, Section C, line 16, column E.
Self-employment income
from Schedule CA
(540NR), column E
	
x	
Schedule CA (540NR),
Part II, Section C,
Self-employment income		
line 16, column D
from Schedule CA		
(540NR), column D

Distribution
Residents of ­California. The distribution of an SEP is treated
the same as the distribution of an IRA. If you have a California
basis for contributions made before 1987, your distribution is
first considered a nontaxable return of your ­California basis.
Once your ­California basis is recovered, your distribution will be
reported the same as federal.
If you have a California basis from contributions made after
1986 and before 1996 due to differences in the amounts of
net income from self employment you reported for federal and
California purposes, your California basis will be recovered on a
pro-rata basis in the same manner as post 1986 nondeductible
IRA contributions under federal law.
Use Worksheet I — Part A on page 14 to compute your
pre-1987 ­California basis. Then use Worksheet I — Part B to
compute your adjustment to federal AGI and your remaining
pre-1987 ­California basis. Use Worksheet II as a summary of
your ­California basis and its recovery.
­California Basis. Your C
­ alifornia basis is the amount of your
SEP contributions that were not allowed as a deduction on
your ­California tax return prior to 1987. A nonresident or former
­nonresident will no longer receive a stepped-up basis for
annual contributions and earnings attributable to periods of
nonresidency.

Self-Employed Retirement
Plans (Keoghs)
The ­California treatment of Keoghs is generally the same as the
federal treatment. For information on the federal treatment of
Keoghs, refer to federal Pub. 560.

Deduction
Beginning with taxable year 1996, your allowable ­California
Keogh deduction is generally the same as your federal Keogh
deduction.
Page 12  FTB Pub. 1005  2023

Prior to January 1, 1996, there may have been a difference in
the amount of the Keogh deduction you claimed if there was a
difference between your federal self-employment income and
your C
­ alifornia self‑employment income (residents, part-year
residents, or nonresidents of C
­ alifornia).
Form 540NR filers. Your Keogh deduction on
Schedule CA (540NR), column E is based upon the percentage
of self‑employment income from Schedule CA (540NR),
column E to total self-employment income computed according
to C
­ alifornia law on Schedule CA (540NR), column D.
Multiply the Keogh deduction from Schedule CA (540NR),
column D by the ratio of C
­ alifornia source self-employment
income to total self-employment income. Enter this figure on
Schedule CA (540NR), Part II, Section C, line 16, column E.
Self-employment income
from Schedule CA
(540NR), column E
	
x	
Schedule CA (540NR),
Part II, Section C,
Self-employment income		
		
line
16, column D
from Schedule CA
(540NR), column D
Example 1 —   You are a part-year resident of C
­ alifornia. Your
total self-employment income for the year is $300,000, and
the amount to be reported on Schedule CA (540NR), Part II,
Section B, line 3, column E, is $100,000. Your Keogh deduction
for federal purposes is $15,000. Your Keogh deduction to be
reported on Schedule CA (540NR), Part II, Section C, line 16,
column E is computed as follows:
$100,000   x   $15,000 = $5,000
$300,000
Report $5,000 on Schedule CA (540NR), Part II, Section C,
line 16, column E.

Distribution
Residents of C
­ alifornia. The taxable amount of your Keogh
distribution for C
­ alifornia will be different from the federal taxable
amount if you have a C
­ alifornia basis to recover.
­California Basis. Your California basis is the amount of Keogh
contributions in excess of California deduction limits in effect
prior to 1996. For taxable years 1963 to 1970, California did not
allow a deduction for contributions to defined contribution Keogh
plans. For taxable years 1971 through 1986, California limited
deductions for contributions to defined contribution Keogh plans
to the lesser of 10% of earned income or $2,500. For years
after 1986 but before 1996, California conformed to federal law
regarding deduction limits, but did not necessarily adopt federal
earned income figures for computing the deduction limitation.
Accordingly, a self-employed individual has a California basis
for any amounts contributed during these years for which the
individual did not receive a California deduction.
A nonresident or former nonresident does not have a California
basis in a Keogh for all contributions and earnings attributable to
periods of nonresidency. Nonresidents and former nonresidents
have a California basis only if they contributed more than would
have been allowed as California deductions had they been
residents of the state.
Recovery of C
­ alifornia Basis. Your Keogh distribution is first
considered to be a nontaxable return of your C
­ alifornia basis.
Therefore, when you receive your distribution, none of the
distribution will be taxed until you have recovered your ­California
basis. Once you have recovered your C
­ alifornia basis, your
distribution must be reported the same as for federal purposes.

If you have received a distribution and you have a ­California
basis, make an adjustment on Schedule CA (540 or 540NR)
to reduce your federal AGI to the correct taxable amount for
­California. Your Schedule CA (540 or 540NR) adjustment is the
lesser of your pre-1987 California basis or Keogh distribution
included in federal AGI.
Use Worksheet I ­— Part A on page 14 to compute your
pre-1987 ­California basis. Then use Worksheet I – Part B to
compute your adjustment to federal AGI and your remaining
pre-1987 ­California basis. Use Worksheet II as a summary of
your ­California basis and its recovery.
Exception: If you made voluntary contributions that were not
deductible on your federal and ­California tax returns, do not
include the amount of the voluntary contributions in your
­California basis. The recovery of the voluntary contributions
for ­California is treated the same as the recovery for federal
purposes. Do not make an adjustment on Schedule CA (540 or
540NR) to recover your voluntary contributions.

Lump-Sum Distribution
If you received a qualified lump-sum distribution and are using
the special averaging method on Schedule G-1, Tax on LumpSum Distributions, follow the revised instructions below when
completing Worksheet I – Part B:
•	 Line 1. Enter the taxable distribution from your federal
Form 1099-R, box 2a.
•	 Line 3. Enter the smaller of line 1 or line 2. Compute the
amounts to enter on Schedule G-1 as follows:
	­California	
Federal	
Worksheet I
	 taxable =	
Form 1099-R, –	
Part B,
	 amount	
box 2a	
line 3
Enter the C
­ alifornia taxable distribution on Schedule G-1, line 8
unless the capital gain election was made. If the capital gain
election was made:
			
Federal
			
Form 1099-R,
	 Schedule G-1,	­California	
box 3
	 line 6 =	
taxable	
X	
Federal
		
amount	
Form 1099-R,
			
box 2a
	 Schedule G-1,	­California	
	 line 8 =	
taxable	
		
amount

–	

Schedule G-1,
line 6

Change in Residency
­California Resident. A ­California resident is taxed on all
income, regardless of its source. If you are a C
­ alifornia
resident and receive a Keogh distribution attributable to your
non‑California self‑employment income, your distribution minus
your ­California basis is taxable by ­California.

Tax on Early Distributions
­ alifornia has a tax on early distributions from IRAs, any
C
qualified retirement plans, annuities, and modified endowment
contracts. This tax is generally the same as federal except the
­California tax rate is 2½% rather than 10%, except for early
distributions from SIMPLE plans during the two-year period
beginning on the date the taxpayer first began participation
in the plan. In that case, the tax rate is 6% rather than 25%.
­California does not have taxes similar to the federal tax on
excess accumulations, tax on excess contributions, or tax on
excess distributions.

Early Distributions. Early distributions are amounts you
withdraw from your qualified retirement plan, annuity, or
modified endowment contract before you are age 59½. For a
list of qualified retirement plans, get form FTB 3805P. The tax
on early distributions is 2½% of the amount of the distribution
included in income or 6% in the case of an early distribution
from a SIMPLE plan during the first two-year period beginning
on the date the taxpayer first began participation in the plan.
The tax on early distribution is imposed in addition to any
regular C
­ alifornia income tax on the distribution. Figure this tax
on form FTB 3805P.
Exceptions: The tax on early distributions does not apply to:
•	 The portion of the distribution that is a return of b