That is correct, you do not need to make the adjustment in TurboTax and it will not be taxed for California Form CA (540NR) Line 12- column D applies to the total (all HSAs), but Column E had the California amount that is actually added to the California income. In general, because California has a progressive tax structure, by using the total income to determine the rate, they can usually squeeze a bit more tax.
@douglasjia
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