How do I deduct HSA-funded medical expenses from California taxes on Turbotax?

[Henfan]

I understand I cannot deduct medical expenses I paid with an HSA from my federal taxes, because the contributions were untaxed, but I should be able to deduct them from my California taxes, since I had to pay California taxes on my contributions. However, I can't find a way to do this on TurboTax. I even went through the process of entering all my expenses in the federal section, in hopes that the California section would find them, but no such luck. Is there any way to do this? Can I access the California deductions form directly somehow?

[Henfan]

Update: I found the California form (Schedule CA), and it imported from the federal section  the amount I spent on medical expenses minus the HSA distributions I had recorded, and it put the amount over 7.5% in Column C. So, it appears to have worked.

[MonikaK1]

California law does not conform to the federal HSA provisions. As a result, a taxpayer must reverse the federal treatment of deductions, interest, and contributions related to their HSA on their California income tax return.

California Assembly Bill 727 was introduced to change the state law to conform with Federal law, but the bill was not passed (see here).

Please see the discussion in this thread for more information. In the California interview, at the screen with the heading "Here's the income that California handles differently", scroll down to the subheading "Investments", and click on Start for "Health Savings Account (HSA) Earnings".

The very next screen will ask you about interest, dividends, and capital gains from your HSA.

[dm777]

I have the same question as the original poster, and the answer provided did not address the poster's question.  The poster is aware that the HSA is counted as income for California, but the question is how do we account for the differences in medical expenses?  The medical expense paid from the HSA account needs to be added to the medical expense shown on the federal tax return for the California return to reflect the entire medical expense.  Unfortunately, the program reports the federal medical expense on the California tax return (which deducts the amount paid via the HSA), not the entire medical expenses, which is what should be reported for California.  Since California counts the HSA contributions as income, they also allow the deductions as medical expenses for California.  The software needs to be updated to reflect this.

[DaveF1006]

I have tested this out in my program and California recognizes the difference in the itemized deduction amounts. If you are able to itemize this year, compare line 12 in your federal 1040 with line 18 of your California 540 and the difference should be the amount that is reported as a distribution on your 1099 SA form. 

The deduction is added back in automatically so you can receive the full itemized deduction in your California return.

[dm777]

Thanks.  I am noticing that it is working properly now.  Not sure if it self-corrected after going through the review process or what, but glad to see it got fixed.