HSA’s and California state tax

[Osedax]

I’m in the (un)fortunate situation where I moved $20K from my HSA bank account to an HSA brokerage account, where I bought heavily into Nvidia.  Dumb luck, and now the account is worth $300K!  I haven’t sold anything yet, so I don’t think I owe tax (yet), but when that time comes, am I allowed to use some of the realized gain to cover the CA taxes owed?  It’s not exactly a medical expense…..

[Bsch4477]

California treats the HSA like any other investment account and taxes realized capital gains , interest and dividends. 

[Osedax]

So if it's seen as any other investment account, then I'm allowed to take some cash out of the HSA to pay the state tax on the realized gain?  This seems counter to the Federal rules for HSA's....

[Bsch4477]

Remember that the IRS and California treat it differently. So yes, you can withdraw money from your HSA as far as California is concerned and do whatever you want with it. But the IRS has different rules. So unless you withdraw the money for qualified medical expenses the IRS will tax it and levy a 20% penalty in addition.