I moved from CA to UT, and now have an HSA. In completing my state returns, California applied my HSA contributions from Utah to my California income. How do I remove?

[melissacampbell4]

If I moved out of CA, and my new employer (in Utah) began contributing to an HSA after I'd left CA, then why would my HSA contributions be counted as California income??

[DanielV01 · Accepted solution]

This is part of how California calculates your taxable income.  You are a California part-year resident, and you are only taxed on your income you earned in California.  However, California will use all of your income to determine how much tax you pay on your California income.  Here's how it works:

California pretends that all of your income is taxable in California by California rules.  (Since CA does not allow a deduction for an HSA, the HSA deduction you are allowed on Federal and Utah returns is added back in for this purpose).  Once the tax is figured out on that amount, the tax you pay in California is prorated to the amount of California income you actually received.

So, if you earned 25,000 in California and 25,000 in Utah, but had 3,000 reported in box 12 with code W for Utah, California will calculate how much tax you would pay on $53,000 in California.  Then, it prorates the tax calculated (multiply tax by 25,000 and divide by 53,000) to arrive at the final California tax.  That is what you should be seeing on your screen.  This cannot be adjusted in TurboTax.