When adjusting their taxable income for California, taxpayers in that state should include the amount of unemployment benefits they received on Schedule CA (Form 540). Taxpayers may include or exclude from their federal tax return various forms of income and deductions, such as mortgage interest, state and local taxes, and unemployment compensation, as well as deductions that are not included or treated differently on Schedule CA. Taxpayers can make sure they are paying the correct amount of California state income tax by updating their taxable income for California on Schedule CA.