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 both your employer and TurboTax made the add-back.
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 your employer already added the HSA contributions back to state wages on the W-2, then 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 redundant HSA contributions". Enter in the right column the dollar amount of HSA contributions made out-of-state.
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 both your employer and TurboTax added back the HSA contributions, and you needed to nullify one of them. This is in case you ever get a letter from the state asking about this adjustment.
