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Returning Member

State tax filing

Based on https://www.ftb.ca.gov releasing on Feb 18, 2020. 

 

As a tax levy, this bill would be effective immediately upon enactment and specifically operative for taxable years beginning on or after January 1, 2020, and before
January 1, 2025.

Federal/State Law

Federal Law

Under federal law, eligible individuals may establish an HSA, which provides tax- favored treatment for current medical expenses, as well as the ability to save on a tax- favored basis for future medical expenses. An HSA is a tax-exempt trust or custodial account created exclusively to pay for the qualified medical expenses of the account holder and his or her spouse and dependents. Generally, individuals are eligible to establish an HSA when they are covered by a high-deductible health plan (High Deductible Plan) and have no other health coverage (with the exception of plans providing certain permitted benefits/coverage).

Within limits, contributions to an HSA made by, or on behalf of, an eligible individual are deductible by the individual in determining adjusted gross income (AGI). Contributions to an HSA are excludable from income and employment taxes if made by the employer. Earnings on amounts in HSAs are not taxable. Distributions from an HSA for qualified medical expenses are not includible in gross income; however, distributions made from an HSA that are used for non-qualified medical expenses are includible in gross income and are subject to an additional tax of 20 percent. The

20 percent additional tax is inapplicable if the distribution is made after death, disability, or the individual attains the age of Medicare eligibility (i.e., age 65).

 

All details can be check from https://www.ftb.ca.gov/tax-pros/law/legislation/2019-2020/AB2384-021820.pdf. Can you confirm that Earnings on amounts in HSAs are not taxable for California?