HSA Contribution for California Taxes

[mkallerud]

I'm seeing the message below. However, my employer did not contribute to my HSA. All of my HSA contributions were my own, although they were deducted from my paycheck by my employer into my HSA. If the wording below is correct, TurboTax is making a mistake. They are my contributions, not my employer's.

About Your HSA Contributions
We've calculated an addition to your California income in the amount of $3,350 for contributions made to your health savings account (HSA) by your employer.

This is the portion of the contributions that was not included in income on your federal return. California does not allow you to exclude employer contributions from income.

The amount can generally be found on Form W-2, Box 12, but could also be reported separately.

[BMcCalpin]

The message is correct. The IRS considers any contributions made by your employer OR made by you by means of a payroll deduction scheme to be "an employer's contribution".

The rationale is that both amounts are pre-tax. This amount is found with code "W" in box 12 on your W-2.

Since California does not allow the exclusion of HSA contributions from state income, the amount is added back to your federal income for purposes of the state.

The confusion is rooted in how the IRS uses the terminology,and TurboTax has to follow that terminology.

[psilencer]

I still think this is incorrect.

In my W2 box 16 (State wages, tips, etc), my employer has already included BOTH the payroll deduction AND the employer contribution.  So there should be no additional CA income since it's already correct on the W2.

[IsabellaG]

It is correct, because the California tax return computes your state taxes based on your Federal Adjusted Gross Income, and no matter whether your employer included the HSA contributions in box 16 of your W-2 or not, you will still arrive at the same taxable income for California. 
 

You can try it for yourself by changing the amounts in box 16  in the federal section of TurboTax. The California tax will not change.