How do I adjust HSA contribution paid by TX employer on CA return?

Forum|Forum|7 years ago
June 6, 2019
1 reply
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I relocated from California to Texas in Aug 2018. My new employer in TX has an HSA and my employer in CA did not have an HSA. How do I back out the contribution to my HSA on my CA return? This income should not be taxable in CA because it was sourced from my TX employer after I relocated. TurboTax will not let me edit the HSA contribution on the CA state return. The field is not editable.

TurboTax Premier Windows

Best answer by DanielV01

California does not tax the HSA contributions you made prior to moving to California. However, California uses all of your income to determine California tax by California law. Since California does not allow a deduction for an HSA, it pretends that all of your income (including the HSA contribution) is taxable in California, computes the tax, and then prorates your tax to the amount of income you actually earned in California. Thus, while your HSA is not taxed in California, it is factored in to calculate California tax.

DanielV01Answer

Employee

California does not tax the HSA contributions you made prior to moving to California. However, California uses all of your income to determine California tax by California law. Since California does not allow a deduction for an HSA, it pretends that all of your income (including the HSA contribution) is taxable in California, computes the tax, and then prorates your tax to the amount of income you actually earned in California. Thus, while your HSA is not taxed in California, it is factored in to calculate California tax.

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DanZAuthor

Employee

Daniel, Thank you for replying but I don't fully understand your answer. As a test, I entered 0 for box 12 (code W) on my W2 and my tax due in CA went down. If the HSA isn't being taxed in CA, the tax due in CA would have stayed the same when I changed box 12 to 0 on my W2. The fact that the tax due went down when I changed it to 0 indicates that some portion of the HSA contribution is being taxed in CA. On what form is the proration done? Maybe I can look at the calculations to see what's going on. Thank you.