CA AB2040

Allows a personal income tax credit equal to 25% of amounts paid for water-efficiency improvements on qualified outdoor landscapes for taxable years beginning January 1, 2016, and ending before January 1, 2019.

Limits the cumulative credit to $2,500 per qualified real property across all taxable years, with the credit amount multiplied by a tax credit adjustment factor (set at 0% unless a budget measure specifies otherwise).

Applies only to principal residences of qualified taxpayers whose income does not exceed 120% of the area median income in their county.

Requires water-efficiency improvements to be certified by the appropriate regional or local water agency and compatible with local ordinances, state water-efficient landscape statutes, or agency-developed water conservation programs.

Unused credit amounts may be carried forward for up to three additional taxable years; the credit expires December 1, 2019.