My CA taxes are prompting me for the following three bits of information:
- Interest earned from HSA
- Dividends earned from HSA
- Net capital gain or loss from HSA
My HSA investments are done through Betterment. I can export .csv sheets detailing my dividends (total is $51.71) and net capital gain/loss ($0.01 short term loss, $0.01 short-term gain).
I have two questions:
- Would my net capital gain/loss then be $0.00?
- What is the definition of interest earned?
- The earnings of the investments in 2020 were $779.73
- Am I correct that the investment's earnings are not the "interest" that CA taxes are looking for?
Interest is generally defined as revenue to you for the use of your money. Dividends are generally the distribution of property (profits) from a corporation.
When Betterment says, "The earnings of the investments in 2020 were $779.73", I don't know what they are referring to: interest, dividends, capital gains, asset growth?
I recommend that you contact Betterment and ask them to quantify your results as "interest", "dividends", and "capital gain/loss", and not as nebulous terms like "earnings".
If they ask why, tell them that even though this is an HSA account, you have to treat it as a regular investment account for California purposes. If the rep you are talking to doesn't understand, ask to speak to someone who deals with customers in California and New Jersey (the other state that does not conform with the federal law on HSAs).
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Thank you for the detailed response!
I went ahead and contacted Betterment Investments and Optum Bank (HSA custodian), and here's what I figured out to do:
- Interest earned from HSA: $2.75
- From Optum Bank HSA 12/31/2020 statement in Year to Date
- Betterment support said that interest is common in different account types, such as a savings account at a bank, but is generally not seen in brokerage accounts like your Betterment account. I agree with them, interest comes from Optum Bank
- Dividends earned from HSA: $51.71
- From Betterment HSA Investments Performance tab
- Net capital gain or loss from HSA: $0.00 (from +$0.01 short-term gains -$0.01 short-term losses)
- From Betterment HSA Investments Documents --> Taxes --> Realized gain/loss --> 2020