State Tax Law Has Changed Too

Here are some of the changes in state tax law for 2001 returns:

* Solar energy system credit: The state now offers a credit for people who purchase and install a solar energy system. For 2001 through 2003, the credit is equal to the lesser of 15% of the net price paid for the system, or $4.50 per rated watt of generating capacity. See FTB Form 3508 for details.

* New interest deduction: Taxpayers who got loans from their utilities to buy energy-efficient heating or cooling equipment for their homes can deduct the interest. The utilities will issue a Form 1098 to the taxpayer detailing the deductible amount.

* Disaster relief: Taxpayers directly affected by the Sept. 11 terrorist attacks or the 2000 Napa Valley earthquake are allowed special tax treatment for disaster losses. For more details, visit the FTB’s Web site at www.ftb.ca.gov.

* Teacher retention credit: This state credit, which was new for the 2000 tax year, continues for 2001. Credentialed teachers in public or private schools can get a credit worth up to $1,500. For more information, see FTB Form 3505.

* Long-term care credit: People caring for a dependent or spouse, or who need long-term care themselves, can take a $500 credit if their adjusted gross income is less than $100,000. See FTB Form 3504 for details.

* Child and dependent care expenses credit: This credit, which gives parents a tax break based on the care costs they pay in order to work, is based on the relatively complicated federal credit with the same name. See FTB Form 3506.

--Liz Pulliam Weston