New California Tax Laws

A few new CA tax laws were passed this summer. The 4 major changes are:

(1) like-kind exchanges (i.e. 1031 exchanges which defer the gain on the sale if the proceeds are reinvested) are only allowed for real estate. Therefore, exchanges of collectibles. artwork and crypto-currencies are not eligible for like-kind exchange treatment anymore.

(2) Individuals are now subject to limits on excess business losses. An excess business loss is the amount by which the total deductions attributable to all of your businesses exceed your total gross income and gains attributable to businesses plus $250,000 (or $500,000 in the case of a joint return). This means that if you have a large business loss, don’t assume it can offset all your other income such as wages or investment income.

(3) California does not allow a net operating loss (NOL) carryback anymore for individuals or corporations. This means if you have a loss it can carryforward to offset future income only and can’t be used to produce a refund from prior tax years.

(4) CA Sales tax relief: For 2020 and 2021, California will not impose sales tax on baby diapers (adult diapers are still taxed) and tampons will not be subject to sales tax.

For a consultation on your state tax issues, please contact me today.