For a nonresident under 50 years old, if California compensation is $1,000 and Federal compensation is $10,000, what is the allowable California IRA deduction?

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In California, the deduction for contributions to an Individual Retirement Account (IRA) is limited for nonresidents based on the income sourced from California. Since the total compensation is split between federal and California sources ($1,000 earned in California and $10,000 federally), the allowable IRA deduction is directly correlated to the California compensation for nonresidents.

For nonresidents under 50, the IRA deduction is limited to the lesser of the contribution limit (which is up to $6,500 for those under 50 years of age in 2023) or the amount of compensation allocated to California. In this case, the compensation sourced to California is $1,000, which is significantly less than the federal compensation of $10,000.

Since the compensation from California is the only relevant amount that can generate an IRA deduction for the nonresident, it directly correlates to the allowable contribution deduction. Thus, if the California compensation is $1,000, then the permissible IRA deduction is limited to that amount. As such, no additional deduction can be claimed above this $1,000, leading to the conclusion that the allowable California IRA deduction is $0, reinforcing that any contribution made cannot exceed the compensation sourced from California.