For tax year 2021, which itemized deduction is reduced by 6% based on AGI according to California tax law?

The correct answer is medical expenses, which are subject to an income-based reduction according to California tax law. For tax year 2021, California follows guidelines that reduce the allowable deduction for medical expenses once the taxpayer’s adjusted gross income (AGI) exceeds a certain threshold. Specifically, medical expenses you can deduct are limited to the amount that exceeds 7.5% of your AGI, and for higher income earners, this cap further restricts the deductible amount.

This percentage reduction ensures that higher-income individuals do not benefit disproportionately from medical expense deductions, aligning the tax benefit more closely with the taxpayer's ability to pay. The focus on AGI means that as income increases, the percentage of medical expenses that can be deducted also decreases, reflecting a progressive approach to tax deductions.

Choosing this item aligns with the intended design of tax law to help those with lower incomes while still providing some relief for medical expenses incurred. Understanding this aspect of California tax law is critical for maximizing deductions and navigating tax preparation effectively.