I would assume since a bill has been introduced to exclude HSA earnings from taxation that currently those earnings are taxable income for NJ. (Unfortunately for those of us in NJ)
NJ Bill A105 (with identical Bill S1415) introduced 1/14/20
Extends certain federal income tax advantages of individual health savings accounts to individual taxpayers under the New Jersey gross income tax
These lines are taken from the Statement at the end of the Bill:
This bill allows gross income tax advantages in connection with
Health Savings Accounts in conformity with the federal income tax
advantages extended to these accounts under recent federal law.
The bill provides a gross income tax deduction for deposits to, and
an exemption for withdrawals from, health savings accounts.
Individuals can use these accounts to cover out-of-pocket medical
care costs under high-deductible medical care plans. The bill also
excludes the earnings in an account from gross income taxation, as
the account earnings are excluded from federal income taxation.
