CalEITC Qualification Expanded/Credit Code 242 PTE Elect
CalEITC Qualification Expanded
Married/Registered Domestic Partner (RDP) Filing Separate no longer automatically disqualifies the taxpayer from being eligible for the California Earned Income Tax Credit (EITC).
Under Public Law No: 117-2 (03/11/2021), the Federal American Rescue Plan Act of 2021 expands the EITC qualifications for 2021 and future years to include married not filing a joint return under certain circumstances. California conforms through California Revenue and Taxation Section 17052.
A Spouse/RDP can claim the CalEITC if married, not filing a joint return for the taxable year, had a qualifying child who lived with the spouse/RDP for more than half of the tax year, and either of the following apply:
- The spouse/RDP lived apart from their spouse for the last 6 months of the year
- The spouse/RDP is legally separated according to state law under a written separation agreement or a decree of separate maintenance and did not live in the same household at the end of the year
Options for Married/RDP not filing a joint return who meet the above requirements and have already filed a California return, but did not take advantage of the EITC, can do the following:
- File a superseded return prior to the April 18, 2022 due date
- Wait for a letter from FTB for instructions
- File an amended return
In addition, a spouse/RDP who meets the above requirements may also qualify for the Young Child Tax Credit if the spouse's/RDP's qualifying child was under the age of 6 at the close of the taxable year.
For more information use the links provided:
|California Earned Income Tax Credit and Young Child Tax Credit
|Crédito Tributario por Ingreso del Trabajo de California (CalEITC)
Claiming Credit Code 242 PTE Elective Tax Credit
Changes have been made to the following forms due to SB 113’s repeal of the Tentative Minimum Tax (TMT) Limitation of the Pass-through Entity Elective Tax Credit and the credit reordering rules to claim credit code 242 (PTE Elect):
- Schedule P (540) - Alternative Minimum Tax and Credit Limitations — Residents
- Schedule P (540NR) - Nonresidents and Part-Year Residents
- Schedule P (541) - Alternative Minimum Tax and Credit Limitations - Fiduciaries
These changes will go into effect for the CA Franchise Tax Board e-file program on Monday, March 21, 2022. If your client’s are impacted by the credit re-ordering changes related to requesting credit code 242 (PTE Elect) on the forms listed above, you might want to consider holding these returns until Monday, March 21, 2022.
Please ensure that your software product has been updated with the latest CA tax changes.