Dependent and Income Definitions

The dependent's standard deduction is the larger of: The dependent's earned income plus $300, or $850 for the 2007 taxable year.

Important: The dependent's standard deduction can never be more than the normal standard deduction.

• Gross Income Definition
• Adjusted Gross Income Definition
• Children with Investment Income
• Other Situations When You Must File
• Earned Income Definition
• Normal Standard Deduction Amounts

Gross Income Definition

California gross income is all income you received in the form of money, goods, property, and services from all sources that are not exempt from tax. Gross income does not include any adjustments or deductions.

Adjusted Gross Income Definition

California adjusted gross income is your federal adjusted gross income from all sources reduced or increased by all California income adjustments.

Children with Investment Income

California law is the same as federal law for the income of children under age 14. For each child under age 14 who received more than $1,700 of investment income for the taxable year, complete Form 540 and form FTB 3800, Tax Computation for Children Under Age 14 with Investment Income, to figure the tax on a separate Form 540 for your child.

Note: If you qualify, you may elect to report your child's income of $8,500 or less (but not less than $850) on your return by completing form FTB 3803, Parent's Election to Report Child's Interest and Dividends. To make this election, your child's income must be only from interest and/or dividends.

Other Situations When You Must File

If you owe any of the following taxes for 2007, you must file Form 540:

• Tax on a lump-sum distribution.
• Tax on a qualified retirement plan, including an individual retirement arrangement (IRA) or on an Archer medical savings account (MSA).
• Tax for children under age 14 who have investment income greater than $1,700.
• Alternative minimum tax.
• Recapture taxes.
• Deferred tax on certain installment obligations.
• Tax on an accumulation distribution from a trust.

Earned Income Definition

Earned income includes wages, salaries, tips, professional fees, net self-employment income, and other compensation received for personal services.

Normal Standard Deduction Amounts

Standard Deduction Table