HSA tax on california state tax return

Forum|Forum|5 years ago
March 17, 2021
3 replies
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I am using the Mac Desktop Premier version of turbotax to file California state tax return. My wife and I have around 6380$ HSA contribution (with company match) in total for 2020. We all work in New York and live in New Jersey for most of 2020. But my wife started a job in California in Octorber 2020 (we still live in New Jersey). So, among these $6380$, there are about 1100$ were from my wife's employer in California and my wife's own contribution after working for the California company.

When we file state tax return for California, turbotax shows the HSA for California state tax calculation is 6380$. However, I think we should only pay for the 1100$ after my wife started to work for the company in California. Am I understanding correctly? How should we adjust this (we cannot change the number directly in Turbotax)?

MaryK4

Level 15

If you are filing the California nonresident tax return, you determine your California tax by multiplying your California taxable income by an effective tax rate.

The effective tax rate is the California tax on all income as if you were a California resident for the current taxable year and for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions, divided by that income.

Use the following formula:

Prorated tax = CA taxable income × Tax on total taxable income ÷ Total taxable income

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douglasjiaAuthor

Level 4

I don't understand. Does this mean I don't need to do any adjustment to Turbotax which means California is not taxing us on the HSA contributions we made from our income outside of California?

MaryK4

Level 15

That is correct, you do not need to make the adjustment in TurboTax and it will not be taxed for California Form CA (540NR) Line 12- column D applies to the total (all HSAs), but Column E had the California amount that is actually added to the California income. In general, because California has a progressive tax structure, by using the total income to determine the rate, they can usually squeeze a bit more tax.

@douglasjia

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