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I relocated from California to Texas in Aug 2018. My new employer in TX has an HSA and my employer in CA did not have an HSA. How do I back out the contribution to my HSA on my CA return? This income should not be taxable in CA because it was sourced from my TX employer after I relocated. TurboTax will not let me edit the HSA contribution on the CA state return. The field is not editable.
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California does not tax the HSA contributions you made prior to moving to California. However, California uses all of your income to determine California tax by California law. Since California does not allow a deduction for an HSA, it pretends that all of your income (including the HSA contribution) is taxable in California, computes the tax, and then prorates your tax to the amount of income you actually earned in California. Thus, while your HSA is not taxed in California, it is factored in to calculate California tax.
California does not tax the HSA contributions you made prior to moving to California. However, California uses all of your income to determine California tax by California law. Since California does not allow a deduction for an HSA, it pretends that all of your income (including the HSA contribution) is taxable in California, computes the tax, and then prorates your tax to the amount of income you actually earned in California. Thus, while your HSA is not taxed in California, it is factored in to calculate California tax.
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