What Are Itemized Deductions for California Taxes?

Itemized deductions for California taxes are the specific personal expenses you subtract from your state taxable income on Schedule CA (540) instead of taking the flat state standard deduction. Because California’s standard deduction is a fraction of the federal one, and because California still allows several write-offs the IRS eliminated, many people who take the federal standard deduction come out ahead by itemizing on their state return.

When Itemizing Is Worth It in California

Itemizing pays off only when your qualifying expenses beat California’s standard deduction for your filing status. For the 2024 tax year, those amounts are $5,540 for single filers and married/RDP filing separately, and $11,080 for married/RDP filing jointly, head of household, or qualifying surviving spouse/RDP.¹ The figures adjust yearly, so confirm the current year’s numbers in the Form 540 booklet before you decide.

Compare that with the federal standard deduction for 2026: $16,100 single, $32,200 joint, $24,150 head of household.² The gap is why so many Californians take the standard deduction federally and still itemize at the state level. Your two decisions are independent. Even if you use the federal standard deduction, you can itemize on Form 540 by completing a pro-forma federal Schedule A that feeds your state calculations.³

Medical and Dental Expenses

California follows the federal rule: you can deduct qualifying medical and dental costs to the extent they exceed 7.5% of your federal adjusted gross income.⁴ Qualifying costs include treatment, diagnosis, prescription drugs, insurance premiums paid with after-tax dollars, and long-term care.⁵

Travel for medical care counts too. The IRS standard mileage rate for medical travel in 2026 is 20.5 cents per mile.⁶ Using the standard rate avoids tracking gas and maintenance, but you still need a mileage log showing date, destination, and medical purpose.

Property Taxes and the SALT Difference

State and local taxes work very differently on your California return. California does not let you deduct state income tax, State Disability Insurance, or state and local sales tax on the state return itself. Those amounts get removed when you translate federal Schedule A figures onto Schedule CA (540).⁷

Property taxes are the flip side. They are fully deductible on your California return with no cap. The federal deduction for total state and local taxes is currently limited to roughly $40,000 ($20,000 if married filing separately), but California imposes no cap.⁷ For homeowners in expensive areas, that single difference can justify itemizing at the state level.

Mortgage and Home Equity Interest

California allows interest on acquisition debt up to $1,000,000, or $500,000 if married filing separately. The permanent federal limit is $750,000.⁴ If your mortgage sits between those two figures, interest that got cut off on your federal return still counts in full on your California return.

Home equity debt is where the state advantage widens. Federal law only permits the deduction if the loan proceeds were used to buy, build, or substantially improve the home. California never adopted that restriction. Interest on up to $100,000 of home equity debt ($50,000 if married filing separately) remains deductible on the state return no matter how you used the money.⁸ A HELOC used to pay off credit cards or fund a personal expense still qualifies at the state level.

Charitable Contributions

California generally tracks federal charitable contribution rules, including the AGI-based percentage limits: cash gifts to public charities up to 60% of AGI, gifts to certain private foundations capped at 30%.⁹ Excess amounts carry forward up to five years. If your California carryover from a prior year is larger than your federal carryover, you add the difference on the state return.

Noncash contributions over $500 require Form 8283. Property donations valued above $5,000, including cryptocurrency and other digital assets, require a qualified appraisal obtained before the filing deadline.¹⁰ Below that threshold, digital asset donations still need documentation of the date acquired, how you acquired the asset, cost basis, and how you determined fair market value.

Casualty and Theft Losses

Personal casualty and theft losses are deductible only in connection with a declared disaster. The federal rule needs a presidential declaration. California is broader: losses in any city or county the Governor proclaims to be in a state of emergency qualify, even without a federal declaration.¹¹

Two floors apply. Each casualty event is reduced by $100, and your net loss for the year must exceed 10% of AGI before any deduction remains.¹² California also lets you claim a disaster loss on the prior year’s return rather than the year the loss occurred, which can produce a faster refund when you need cash for recovery.¹¹

Miscellaneous Deductions Subject to the 2% Floor

This is the biggest state-only category. The federal government eliminated the deduction for miscellaneous expenses subject to the 2% AGI floor starting in 2018 and made that elimination permanent. California never conformed.¹³ On the state return, the portion of these expenses that exceeds 2% of your federal AGI is still deductible.⁴

What fits in this category:

Unreimbursed employee expenses, including work-related travel, professional dues, required uniforms, tools, and home office costs your employer did not pay for
Tax preparation fees, whether paid to a preparer or spent on software and e-filing
Investment expenses such as advisory fees and safe deposit box rental for investment documents

Unreimbursed employee expenses require Form 2106 prepared with California amounts, even though the form is largely obsolete for federal purposes.¹³ Records matter: mileage logs, receipts for anything over $75, and documentation tying each expense to your job.¹⁴

Gambling Losses

Gambling losses are deductible only up to your gambling winnings, and only if you itemize. For tax years beginning in 2026, a new federal cap limits the deduction to 90% of losses. California follows this rule.⁴ Win $50,000 and lose $50,000 and you no longer break even. You can deduct $45,000, leaving $5,000 in taxable gambling income after netting zero in cash. Keep records of every session, including dates, locations, and amounts won or lost.

How to Claim Itemized Deductions on Your California Return

The mechanics run through Schedule CA (540). You start with your federal Schedule A totals, then adjust each category where California law differs.⁷ The main adjustments:

Subtract state income tax, SDI, and sales tax that appeared on your federal Schedule A. California does not allow them.
Add back property tax the federal SALT cap excluded, so your full property tax deduction lands on the California return.
Add back mortgage interest disallowed by the federal $750,000 limit, up to California’s $1,000,000 ceiling.
Add unreimbursed employee expenses, tax preparation fees, and other 2% miscellaneous items that federal law no longer allows.

The result is usually a larger itemized deduction on your California return than on your federal return. The final figure flows from Schedule CA (540) to line 18 of Form 540.³

High-Income Limitation

California imposes its own reduction on itemized deductions for higher earners. The state cuts your total by the lesser of 6% of the amount your federal AGI exceeds a California-specific threshold, or 80% of your otherwise allowable itemized deductions. The thresholds adjust annually, so check the current Schedule CA instructions if your income sits in the range where this could apply. This limitation is separate from any federal restriction and can affect your California return even when your federal return is unaffected.

Records to Keep

The Franchise Tax Board can propose adjustments up to four years from the due date or the date you filed, whichever is later, and up to 12 years for abusive tax avoidance transactions.¹⁵ Plan your retention accordingly.

Medical: invoices, payment receipts, Explanation of Benefits statements, and a mileage log if using the 20.5-cents-per-mile rate
Property taxes: county tax bills and proof of payment
Mortgage interest: Form 1098 from your lender
Charitable gifts: written acknowledgment from the charity for any single gift of $250 or more, obtained before you file; a qualified appraisal for noncash donations over $5,000, including digital assets; additional basis and fair market value records for digital asset donations over $500¹⁶¹⁰
Employee expenses: Form 2106 with California amounts, mileage logs, receipts over $75, and records linking each expense to job duties
Casualty losses: photos, repair estimates, insurance claim paperwork, and proof the loss fell within a declared disaster area

What Happens if You Overstate a Deduction

The IRS imposes a 20% accuracy-related penalty on any underpayment tied to a substantial understatement of income tax, which includes claiming deductions you were not entitled to.¹⁷ The penalty rises to 40% for gross valuation misstatements, which can apply when a noncash charitable donation is wildly overvalued. The FTB’s penalty structure generally parallels the federal one.

Interest compounds on top of penalties. The IRS rate was 7% for the first quarter of 2026 and adjusts quarterly.¹⁸ Combined, they can outrun any tax saved by an inflated claim. Solid documentation is the defense if either agency questions an amount.

1
Franchise Tax Board. 2024 Instructions for Form 540 Personal Income Tax Booklet
2
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
3
Franchise Tax Board. 2025 Instructions for Form 540 California Resident Income Tax Return
4
Franchise Tax Board. Deductions
5
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses
6
Internal Revenue Service. 2026 Standard Mileage Rates
7
Franchise Tax Board. 2025 Instructions for Schedule CA (540)
8
Franchise Tax Board. 2024 Instructions for Schedule CA (540NR)
9
Internal Revenue Service. Charitable Contribution Deductions
10
Internal Revenue Service. Instructions for Form 8283 (Rev. December 2025)
11
Franchise Tax Board. 2025 Disaster Loss How to Claim a State Tax Deduction
12
Internal Revenue Service. Publication 547 (2025), Casualties, Disasters, and Thefts
13
Franchise Tax Board. 2024 Instructions for Schedule CA (540)
14
Internal Revenue Service. Instructions for Form 2106 (2025)
15
Franchise Tax Board. Keeping Your Tax Records
16
Internal Revenue Service. Charitable Organizations Substantiation and Disclosure Requirements
17
Office of the Law Revision Counsel. 26 US Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments
18
Internal Revenue Service. Quarterly Interest Rates