Enya Smith has a first mortgage and a smaller home equity loan. Enya took out the home equity loan on January 15, 2021. It was not used to build, buy, or improve her home. The equity loan proceeds were used to purchase a new car and pay off credit cards. During the year, she paid $6,350 in interest on her first mortgage and $1,490 in interest on the home equity loan. She is not allowed to deduct the home equity loan interest on her Schedule A (Form 1040). Is she allowed to deduct the home equity loan interest on her California return? If so, how does she report it on her California return?

a. No. If it is not allowed on the federal return, it is not allowed on the California return.

b. Yes. The $1,490 of interest is reported directly on her Form 540, line 16.

c. Yes. The $1,490 of interest is subtracted from her California itemized deductions on Schedule CA (540), Part II, line 8a, column B.

d. Yes. The $1,490 of interest is added to her California itemized deductions on Schedule CA (540), Part II, line 8a, column C.