My W-2 (properly) includes both employee and employer contributions. I've included the amount from my W-2 in the federal section and am now working on my California state return. TurboTax says "employer" contributions to my HSA are taxable in California. The app has added the full $7,000 back to my income. However, that number includes my personal contributions. Does California tax me on my own HSA contributions? That doesn't seem right but I'm not able to adjust the number.
Thanks for any help.
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Yes, California taxes all HSA contributions, whether by you or your employer.
What the IRS calls "employer" contributions are employer contributions (if any) and employee contribution by means of payroll deduction. The are reported in the aggregate with code W in box 12 of your W-2.
So TurboTax is working correctly; it's just not obvious because of the terminology.
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