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rem
New Member

I moved from CA to OR last year, and had the same employer and HSA in both. How do I prevent getting taxed by CA on the contributions I made in OR?

I moved from California to Oregon last year, and had the same employer and HSA in both. I contributed $700 in CA and $1300 in OR, but all $2000 is being taxed in CA. How do I prevent getting taxed by CA on the $1300? I don't see a place on the non-resident portion of the CA state tax return to split the HSA by state.

1 Best answer

Accepted Solutions
BMcCalpin
Level 13

I moved from CA to OR last year, and had the same employer and HSA in both. How do I prevent getting taxed by CA on the contributions I made in OR?

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 to account for this.

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.

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 out-of-state HSA contributions". Enter in the middle column (i.e., a subtraction) the dollar amount of HSA contributions made out-of-state. This will be subtracted from your California state income.

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 TurboTax added back all the HSA contributions not just the ones on California source income, and you needed to nullify that. This is in case you ever get a letter from the state asking about this adjustment.

View solution in original post

2 Replies
BMcCalpin
Level 13

I moved from CA to OR last year, and had the same employer and HSA in both. How do I prevent getting taxed by CA on the contributions I made in OR?

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 to account for this.

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.

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 out-of-state HSA contributions". Enter in the middle column (i.e., a subtraction) the dollar amount of HSA contributions made out-of-state. This will be subtracted from your California state income.

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 TurboTax added back all the HSA contributions not just the ones on California source income, and you needed to nullify that. This is in case you ever get a letter from the state asking about this adjustment.

View solution in original post

rem
New Member

I moved from CA to OR last year, and had the same employer and HSA in both. How do I prevent getting taxed by CA on the contributions I made in OR?

Thanks for the instructions. I've filled in the "Other Adjustments to Income", and the following section on Nonresident Adjustments > Farm and Other Income > Federal Adjusted as "-$1300". Next to it is a box for "California Amount". Do I put -1300 or 0? Thanks!
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