What deduction can a California taxpayer take on their tax return if they have $35,000 AGI and $1,000 in tax preparation fees?

A California taxpayer can only deduct tax preparation fees if they are itemizing deductions, and even then, the deduction on federal returns for tax preparation fees has been eliminated for most taxpayers under the Tax Cuts and Jobs Act, which affects tax years 2018 to 2025.

In California, tax laws may differ slightly, but generally, to claim any deductions, the taxpayer would need to exceed the standard deduction limit, which may not be significant given $35,000 Adjusted Gross Income (AGI). The taxpayer should consider their taxable situation, especially if they are near the threshold for the standard deduction.

If the taxpayer does itemize, the calculation for deductible amounts may also be subject to the 2% AGI threshold — which was previously applicable prior to the changes made in federal tax law. Therefore, if a taxpayer had $1,000 in tax preparation fees, only the amount that exceeds 2% of the AGI could be deductible. In this example, 2% of $35,000 is $700. Thus, only $300 (the fee exceeding that threshold) can potentially contribute to the deduction if the taxpayer itemizes.

Taking all of this into account, the most accurate response in this scenario is that a taxpayer