"Is the Employee portion deductible in California?" No, it is not deductible either in California.
By and large, you should let California in TurboTax do what it is going to do.
1. The HSA contributions have to be added back to state income, but the code W amount is added back in a different place than the direct contributions (i.e., not through your employer).
2. The HSA is treated like an investment account, so you have to report interest, dividends, and capital gains, even though your HSA custodian won't report that to you without badgering.
3. Penalty situations like excess contributions and distributions not for medical purposes have to be backed out.
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