I am filing my taxes as a non resident alien manually this year with using some tax software for verification.

My Income is $65,000. I have a part of it exempt under US Tax treaty with India and my adjusted Gross Income is 53,800~. The federal refund I am getting matches exactly with multiple tax softwares- so far so good.

Excerpts from my federal return:

Tax treaty section

Total. Enter this amount on Form 1040-NR-EZ, line 6. Do not enter it on line 3 or line 5 . .

Main section:

3 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . 53,800

6 Total income exempt by a treaty from page 2, Item J(1)(e) . . . 12,200
7 Add lines 3, 4, and 5 . . . . . . . . . . . . . . . . 53,800

10 Subtract the sum of line 8 and line 9 from line 7. This is your adjusted gross income 53,800

I am filing CA540NR for my CA state return. There is an entry asking for Federal AGI from line 10 in my 1040EZ form. I input the 53,800$ figure from it. My tax refund comes out to be xx.xx

However, the tax softwares I'm using are using 65,000 instead of 53,800 and my refund amount is coming out to be lower. I am lost here about what is the right.

This is from the CA 540NR form, which looks pretty straight forward.

Enter federal AGI from federal Form 1040 or 1040-SR, line 8b; 1040NR, line 35;
or 1040NR-EZ, line 10 

I read somewhere that the tax treaties are not honored in the state returns, however when I copy line 10, the deducted income will be included in the state return.

1 Answer 1


California does not recognize income tax treaties. The federal AGI is carried over, but you have to add back the excluded income in Schedule CA (California adjustments). In the instructions for form 540NR Schedule CA, Columns B and C, line 1 (wages), it mentions:

Foreign income. If you excluded income exempted by U.S. tax treaties on your federal Form 1040 or 1040-SR (unless specifically exempt for state purposes), enter the excluded amount in column C. [...]

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