RRSP withdrawal, Schedule CA adjustment to medical expense

[glenm]

RRSPs and California have received a fair amount of treatment here, but I haven't seen this angle covered, nor is it turning up in search. Apologies if I've missed it.

In 2006 I collapsed one of my RRSP accounts, for which I've previously elected and on which I've been paying CA tax on interest etc (in a raft of 540X returns). The withdrawal resulted in a larger income on my federal return (current RRSP value - value in 1996), which increase my fed income and reduced my allowable Schedule A medical expenses.

Since California treats RRSP withdrawals as untaxable (income in these accounts is taxed as earned), it seems to me that the reduction to itemized deductions in the Fed Sch A should be corrected as a CA adjustment.

The best way I could figure how to do this is on Sch CA line 41, I claimed the difference to my itemized medical deduction caused by the increase in federal income. I annotated this with "Sch a line 9 reduction due to RRSP distribution"

This was in addition to the positive adjustment for income within my RRSP accounts (sch CA line 21f) and negative adjustment to remove the pension income itself (sch CA line 16).

Comments? Is there a better approach?

BTW, someone (nelson, I think) previously recommended Custom House for transferring money. I used them for this transaction and it was very smooth and a much better rate than others I could find. So thanks!

thanks,

glen

[nelsona]

Line 41 would seem to be the place for it, since this is where medical expenses not eligible for the feds would be listed. Of course, I'm sure you did not reduce your medical claims for California for all the years when your CA AGI was higher than your federal one, but that is another story.

[glenm]

Good point. As it turns out, the prior years wouldn't have seen any effect because the various expenses were far outweighed by income. Little fiddly differences of a few hundreds or thousands of interest income makes no difference to the degree of zero. :/

This year I took a long sabattical -- lower income + medical insurance meant a couple of grand worth of my insurance payments wound up allowable. Until a large RRSP withdrawal came into play. *sigh*

But there's still the the state return.

thanks