I've had an HSA in California for several years. This is the first year that Turbo Tax is prompting me to report HSA earnings so that they can be taxed on my CA state return. It's also the first year that I used HSA cash to purchase shares of mutual fund (within my HSA). Thus far, I have only bought shares. I have not sold any. Checking over my Year-end HSA summary from Fidelity, I was surprised to see that I have over $2000 of "Income" from my HSA. This consists of about $100 interest on my HSA cash and $1600 of Long Term Capital Gains distribution, and $100 of Short Term Capital Gains distribution, and $200 of "Dividend". All of the Capital Gains and Dividends were awarded by the mutual fund on Dec. 30 and immediately/automatically reinvested to buy more shares of the same fund. Must I report the whole $2000 so that the state of CA can take about 10% of it?
