Updated October 24, 2026. Quick answer: Line 32 of California Form 540 is your exemption credits. The form says “Enter the amount from line 11.” and the booklet says that “Exemption credits reduce your tax.” If your federal AGI on line 13 is above the amount for your filing status, a worksheet limits the credits before you enter them on line 32.
What this line does
On the form, line 32 reads “Exemption credits. Enter the amount from line 11. If your federal AGI is more than $252,203, see instructions.” It sits on the page headed “Side 2 Form 540 2025”. Line 11, the source of the amount, reads “Exemption amount: Add line 7 through line 10. Transfer this amount to line 32”.
The booklet’s instruction opens “Exemption credits reduce your tax. If your federal AGI on line 13 is more than the amount shown below for your filing status, your credits will be limited.” The tax the credits reduce is on California Form 540 line 31, and the whole sequence is on California Form 540 line by line.
Who it applies to
The booklet ties the limits to a federal AGI amount that depends on filing status. It asks: “Is Form 540, line 13 more than:” and then gives the answers “Complete the AGI Limitation Worksheet that follows.” or “Follow the instructions on Form 540, line 32.”
Registered domestic partners are handled separately: “For purposes of computing limitations based upon AGI, RDPs recalculate their AGI using a federal pro forma Form 1040 or Form 1040-SR, or California RDP Adjustments Worksheet”. “If your recalculated federal AGI is more than the amount shown below for your filing status, your credits will be limited.”
What the instructions say
| Line | What the form says |
|---|---|
| Intro | “Exemption credits reduce your tax. If your federal AGI on line 13 is more than the amount shown below for your filing status, your credits will be limited.” |
| Form, line 32 | “Exemption credits. Enter the amount from line 11. If your federal AGI is more than $252,203, see instructions.” |
| Registered domestic partners | “For purposes of computing limitations based upon AGI, RDPs recalculate their AGI using a federal pro forma Form 1040 or Form 1040-SR, or California RDP Adjustments Worksheet” |
| If the AGI amount is exceeded | “Complete the AGI Limitation Worksheet that follows.” |
| If it is not | “Follow the instructions on Form 540, line 32.” |
The AGI Limitation Worksheet has fourteen lines, a to n. Each is quoted below, with the dollar words as the worksheet prints them.
| Worksheet line | What the form says |
|---|---|
| a | “Enter the amount from Form 540, line 13” |
| b | “Enter the amount for your filing status on line b:” |
| c | “Subtract line b from line a” |
| d | “Divide line c by $2,500 ($1,250 if married/RDP filing separately). If the result is not a whole number, round it to the next higher whole number” |
| e | “Multiply line d by $6” |
| f | “Add the numbers from the boxes on Form 540, lines 7, 8, and 9 (not the dollar amounts)” |
| g | “Multiply line e by line f” |
| h | “Add the total dollar amount from Form 540, lines 7, 8, and 9” |
| i | “Subtract line g from line h. If zero or less, enter” zero, as the line is worded |
| j | “Enter the number from the box on Form 540, line 10 (not the dollar amount)” |
| k | “Multiply line e by line j” |
| l | “Enter the dollar amount from Form 540, line 10” |
| m | “Subtract line k from line l. If zero or less, enter” zero, as the line is worded |
| n | “Add line i and line m. Enter the result here and on Form 540, line 32” |
Line b lists the same three filing status amounts shown in the next section.
The figures the form prints
Each of the three AGI amounts is printed on its own line in the booklet, next to its filing status. The worksheet also prints its own dollar steps inside the lines quoted above, such as “Divide line c by $2,500 ($1,250 if married/RDP filing separately).” and “Multiply line d by $6”.
| Filing status | Line 13 more than |
|---|---|
| “Single or married/RDP filing separately” | “$252,203” |
| “Married/RDP filing jointly or qualifying surviving spouse/RDP” | “$504,411” |
| “Head of household” | “$378,310” |
Where the result goes next
Line n tells you where the answer goes: “Add line i and line m. Enter the result here and on Form 540, line 32”. On the form the next step is line 33, which reads “Subtract line 32 from line 31. If less than zero, enter -0-”. For the federal side of credits see Form 1040 lines 19, 20 and 21, and for the state overview see California retirement taxes.
A worked example
This is an illustration, not a state example. The AGI, the box entries and the dollar totals below are invented for the computation. The steps follow the worksheet lines quoted above for a single filer whose line 13 is above the single filer amount.
| Worksheet line | Calculation | Result |
|---|---|---|
| a | Invented federal AGI on line 13 | $270,000 (invented, for the computation) |
| b | Single filer amount printed in the worksheet | $252,203 (printed in the worksheet) |
| c | 270,000 minus 252,203 | $17,797 (computed) |
| d | 17,797 divided by 2,500 is 7.1188, not a whole number, so round up to the next higher whole number | 8 (computed) |
| e | 8 times $6 | $48 (computed) |
| f | Invented box entries on lines 7, 8 and 9 of 1, 0 and 1, added | 2 (invented, for the computation) |
| g | 48 times 2 | $96 (computed) |
| h | Invented total dollar amount on lines 7, 8 and 9 | $300 (invented, for the computation) |
| i | 300 minus 96, zero if less | $204 (computed) |
| j | Invented number in the line 10 box (one dependent) | 1 (invented, for the computation) |
| k | 48 times 1 | $48 (computed) |
| l | Invented dollar amount on line 10 | $500 (invented, for the computation) |
| m | 500 minus 48, zero if less | $452 (computed) |
| n | 204 plus 452 | $656 (computed) |
In this invented case the worksheet ends with $656 on line n, which is the amount the worksheet sends to line 32. Your own boxes and dollar amounts come from lines 7 to 10 of your own return.
Edition and line numbers
This page reads the California 540 Forms and Instructions, 2025 Personal Income Tax Booklet, and Form 540, California Resident Income Tax Return (2025), for tax year 2025, the current file the Franchise Tax Board served on 2026-10-24. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Skipping the worksheet when line 13 is over your filing status amount. The booklet says “Complete the AGI Limitation Worksheet that follows.”
- Rounding down on line d. The worksheet says “If the result is not a whole number, round it to the next higher whole number”
- Using the dollar amounts instead of the box counts on lines f and j. The worksheet says “Add the numbers from the boxes on Form 540, lines 7, 8, and 9 (not the dollar amounts)”
Related: California retirement taxes, California tax brackets, and Form 1040 lines 19, 20 and 21.
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Answer againSources
- California 540 Forms and Instructions, 2025 Personal Income Tax Booklet, Franchise Tax Board: www.ftb.ca.gov
- Form 540, California Resident Income Tax Return (2025), Franchise Tax Board: www.ftb.ca.gov
- Related official page (not quoted): Franchise Tax Board, 2025 Personal Income Tax Booklet page: www.ftb.ca.gov
Read from the state revenue documents linked above on October 24, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.