My W2 box 16 (state wages) already includes contributions made by me and the employer. But Turbo Tax is adding the same amount again. i.e.
TurboTax does not make the presumption that the California Wage amount includes the add back for the HSA contributions; therefore it adds the amount of the HSA contributions back for you.
You have noticed that the HSA contributions are part of your California wages (i.e., they are not pre-tax). In this case, you can counteract the TurboTax automatic adjustment by going to the screen entitled "Here's the income that California handles differently" and looking at the bottom at the line "Other Adjustments to Income".
Click on Start and enter "Duplicate HSA add-back" for description and the amount of the HSA contributions as a Subtraction (so it will be subtracted from your state income).
[Edited 2.27.2018 | 13:32 CST]
I corrected a typo - in the second paragraph, I changed "after-tax" to "pre-tax", as it should have been.
California form 540 uses the Federal AGI which is based on the federal W2 wages W2 box 1 (which already has HSA contributions subtracted), instead of using California W2 wages box 16 (which does not have HSA contributions subtracted) which also appears in 540 line 12. So it's correct for Turbotax to add HSA contributions back to income on 540 line 16 and 17 on form 540. So why recommend a manual adjustment?
Has there been guidance on Box 16 to always include the HSA contributions for CA? Turbotax should assume that it is included instead of "double" taxing the customer. At least let the customer know that the "double" taxing could occur in CA.