When I answered yes that I had a HDHP my California refund went down

[Tax-Cleric]

It was a refund of $499 when I said yes I had an HDHP it drop to owing $129.

[BMcCalpin · Accepted solution]

HSA contributions are not deductible in California.

This means that your HSA contributions are added back to your federal income to make your state income. This would result in you owing more tax at the moment the program realized that it needed to add back the HSA contributions.

The timing of the interaction of the federal and Californi returns is hard to pin down, but in any case you need to be sure to complete the HSA interview so that form 8889 is properly completed by TurboTax and your HSA contributions and distributions are reported as tax-free on the federal level.