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State tax filing
No adjustment is needed. The reason why you see this information is how California calculates non-resident tax. What they do is determine how much tax you would pay on all of your income using California income rules (including the HSA as taxable income), and then pro-rating that tax to the amount of income actually earned in California.
Using that formula, the HSA is not taxed, but is used to help determine how much tax you should pay to California on the income you actually earned in California.
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‎February 21, 2020
8:56 PM