Question

Personal post-tax contribution to HSA in California

Forum|Forum|1 year ago
August 26, 2024
2 replies
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If I contribute post-tax money to an HSA in California, Is the amount I contribute fully deductible for federal taxes? Does CA stick its mittens into the pot and try to prevent or get more of my money thru fines or other theatrics for this scenario, or do they play nice?

B

Bsch4477

Employee

While you get a federal deduction you don’t get one on your California return.

O

Opus 17

Employee

The other thing that happens is that, interest or investment gains are taxable.

California treats HSA like a regular broker investment account. You don't get a deduction for contributions. If you make a withdrawal for any reason, you pay tax on the earnings that you withdraw (interest or capital gains, depending on the HSA), but you don't pay tax on the principle.

The one time this is an advantage is that if you make a withdrawal that is federally taxable (a withdrawal not used for medical expenses), California will only tax any interest or gains and not the entire amount like the IRS will.