It might be right.
You would expect that a deduction on the federal return that is non-deductible on the state return should have no effect on the state return.
But returns are complex things, and many things interact in ways that you might not expect.
For example, the Earned Income Credit in California can vary based on what the federal AGI is. If you change the federal AGI (which the HSA contribution on line 25 on Schedule 1 will do), then the calculation of the Earned Income Credit in California will change (see Part V on CA form 3514) where the federal AGI appears on line 3 of the smart worksheet. This can dramatically change your refund or tax due.
This means that we don't have nearly enough information to know if your return is incorrect or not.
Please go back to your return and do the following:
- Remove the HSA contribution from your federal return
- Go to your state return (CA 540)
- Write down the value of lines 19, 31, 64, 71, and 76 on CA 540
- Go back to the federal return to the HSA interview and add the HSA "personal" contribution
- Go all the way through the HSA interview
- Go back to the CA return and look at the lines you copied down
- Which lines have different values? If one line is different, track back to see where the return changed and why
- If line 19 (CA taxable income) is the same as before, then the adjustment in CA for the contribution was probably correct.
Tell us what you discover.