I had a realized loss in my HSA. I live in Califor...
Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
TurboTax has you covered during Covid. Get the latest stimulus info here.
cancel
Showing results for 
Search instead for 
Did you mean: 
jeff.begley
New Member

I had a realized loss in my HSA. I live in California, which doesn't recognize HSAs as tax exempt. They are treated as regular accounts. I want to write off the loss.

Can TT write off an investment loss on my California return that doesn't also appear on my Federal return?
3 Replies
ColeenD3
Employee Tax Expert

I had a realized loss in my HSA. I live in California, which doesn't recognize HSAs as tax exempt. They are treated as regular accounts. I want to write off the loss.

Please see this answer from BillMcC.

 

As you know, California does not permit the deduction of HSA contributions. Therefore, California treats an HSA like an ordinary investment account.

 

Depending on what type of investments you have in the HSA, you will have the possibility of interest, dividends (qualifying or ordinary), and capital gains.

 

You may have to call the HSA administrator and ask if the "net investment gains" is "capital gains". Try to get an agent who is familiar with the two states that do not permit HSAs (California and New Jersey) to help you derive the numbers for interest, dividends, and capital gains. Note that since 48 out of 50 states either don't tax HSAs or don't even have an income tax, many of the agents may not be familiar with your situation.

 

As you may already know, you enter these amounts starting at the screen in the California interview entitled "Here's the income that California handles differently". Look down to the subheading "Investments", and click on Start (or Revisit) on the line entitled "Health Savings Account (HSA) Earnings".

 

Note that since HSAs are not deductible, HSA distributions for non-medical expenses or for excess contributions are not penalized in California.

 

Also note that fees are deductible in California since the HSA is a regular investment account. In the same section of the menu screen as the HSA entries, you will see "Investment Income Expenses". Click on this line to be able to enter your HSA administrative fees

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
jeff.begley
New Member

I had a realized loss in my HSA. I live in California, which doesn't recognize HSAs as tax exempt. They are treated as regular accounts. I want to write off the loss.

Thanks ColeenD3. The issue is that I have a realized Capital Loss, not a Capital Gain. Since California treats HSAs as any old taxable investment account, I should be able to deduct the loss on my California return. However, it wont appear on my Federal return. I know some tax prep services can't handle this. I'm just trying to figure out if TurboTax can handle this scenario before committing to TurboTax.

BillM223
Employee Tax Expert

I had a realized loss in my HSA. I live in California, which doesn't recognize HSAs as tax exempt. They are treated as regular accounts. I want to write off the loss.

In the California interview, after telling you that California does not allow the deduction of HSA contributions (which you already knew), TurboTax shows you a screen with the title of "Here's the income that California handles differently".

 

Below the subheading "Investments", you will click on Start for "Health Savings Account (HSA) Earnings".

 

The next screen will ask you for interest from the HSA, dividends, and net capital gain or loss from HSA.

 

You enter the capital loss as a negative number, and the loss flows to Schedule CA (540) - California Adjustments.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Dynamic AdsDynamic Ads
v
Privacy Settings