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ferndale50
New Member

CA nonresident adj for HSA. I found two examples that both say to exclude HSA contributions from CA income to enter $0 in nonresident adj. The software is not updating.

 
3 Replies
BMcCalpin
Level 13

CA nonresident adj for HSA. I found two examples that both say to exclude HSA contributions from CA income to enter $0 in nonresident adj. The software is not updating.

Unfortunately, the software has been updated since that answer was written, so please see the following:

As you see, TurboTax adds the entire amount of the HSA contributions to California income, because HSA contributions are not deductible nor excludible in California. You will need to manually adjust the California income account for the fact that TurboTax added back all your HSA contributions, even ones not made in California.

To recap: the federal tax return permits contributions to an HSA to be deducted from federal income tax (up to a limit). However, California does not permit this deduction. Therefore, California, by default, adds the total amount of the HSA contribution back to the federal income, on the assumption that you were a California resident all year.

However, if you were a non-resident when some or all of the HSA contributions were made, an adjustment needs to be made.

Go to State Returns, and navigate to your California return.

In Income and adjustments, proceed through the interview. You may see a screen announcing that HSA contributions are treated differently in California. Just hit Continue.

You will notice on the main page ("Here's the income that California handles differently"), the first line item is (likely to be) "Health Savings Account (HSA) Contributions". Here TurboTax notes that the amount of your HSA contribution has been added back to the California return.

NOTE, despite the Edit button, you can't change this here.

Scroll down to Miscellaneous Adjustments on this screen. Click Start for Other Adjustments to Income.

Enter in the left column "adjustment for out-of-state HSA contributions". Enter in the middle column (i.e., a subtraction) the dollar amount of HSA contributions made out-of-state. This will be subtracted from your California state income.

Make a note on your copy of your state tax return (because, of course, you are going to save a copy, right?) that you made this adjustment because TurboTax added back all the HSA contributions (even ones made while a non-resident), and you needed to counteract this. This is in case you ever get a letter from the state asking about this adjustment.

Thu
New Member

CA nonresident adj for HSA. I found two examples that both say to exclude HSA contributions from CA income to enter $0 in nonresident adj. The software is not updating.

Hi, I am in same situation if you can help me please. My husband and I were resident in Missouri entire year of 2020. Because of my husband’s job, he had some income in CA which means we need to file CA nonresident tax return. He did not have HSA but I had HSA who did not have any income in CA. Looks like Turbotax counted entire amount to be taxed as CA. That does not sound right since that is not for my husband who did not have HSA. How can I manually do that on paper or adjust on Turbotax? Thank you! 

BillM223
Expert Alumni

CA nonresident adj for HSA. I found two examples that both say to exclude HSA contributions from CA income to enter $0 in nonresident adj. The software is not updating.

@Thu

 

The advice that I gave above is still substantially correct. The HSA deduction belongs to you and you had no income in CA. But TurboTax has no way to know this until you tell it...so this is how you do it:

"

You will notice on the main page ("Here's the income that California handles differently"), the first line item is (likely to be) "Health Savings Account (HSA) Contributions". Here TurboTax notes that the amount of your HSA contribution has been added back to the California return.

 

NOTE, despite the Edit button, you can't change this here.

 

Scroll down to Miscellaneous Adjustments on this screen. Click Start for Other Adjustments to Income.

 

Enter in the left column "adjustment for out-of-state HSA contributions". Enter in the middle column (i.e., a subtraction) the dollar amount of HSA contributions made out-of-state. This will be subtracted from your California state income.

 

Make a note on your copy of your state tax return (because, of course, you are going to save a copy, right?) that you made this adjustment because TurboTax added back all the HSA contributions (even ones made while a non-resident), and you needed to counteract this. This is in case you ever get a letter from the state asking about this adjustment.

"

 

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