Yes, that's correct. The medical expenses that you paid from your HSA can be claimed as medical expenses on the New Jersey tax return because New Jersey does not allow any tax benefit for an HSA. Money that you put into your HSA is pre-tax for federal, but not for New Jersey. The money in your HSA was already taxed by New Jersey. So as far as New Jersey is concerned, using it for medical expenses is just like using part of your pay for medical expenses.
