State tax filing

Thank you for the clarification.

If you enter the Medicaid Waiver 1099 as recommended in this help article:

1. Sign in to TurboTax and open your return.
2. Select Federal, then Wages & Income.
3. Under Less Common Income, select Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C.
4. Select Start or Revist next to Other income not already reported on a Form W-2 or Form1099.
5. Answer Yes to Did you receive any other wages?  and Continue.
6. Continue through the screens, leaving the boxes blank until you get to the Certain nontaxable Medicaid waiver payments not reported on Form W-2 or 1099 screen.
7. Enter the amount of Medicaid waiver payments and Continue.
8. Finish entering the rest of your income.
9. When you get to the Earned Income Credit section in Deductions and Credits, we’ll ask if you want to add your Medicaid waiver payment to your income for this credit. You can answer based on what benefits you most.

...then the amount is entered as income and deducted as an adjustment to income on the Federal return.

I just tested this and I got the same result you did with the California return: the amount is deducted again from California income, even though the Federal Adjusted Gross Income is used as a starting point.

I am reporting this issue for further testing and investigation.

For now, to correct your California return, you can go to the California interview in TurboTax; on the screen, "Here's the income that California handles differently", select Other Adjustments to Income. Enter a description and the amount you identified as an Addition to California income.