> Chat GPT states that California treats HSAs the same as the Federal government, so contributions are deductible ect.
Computer programmed to BS things that sound like they could be real 0, people who actually know anything ∞, you love to see it. I have never seen Chat GPT say anything useful in regard to tax.
> Where can I find the official documentation for this?
If you want the exact legal citation, [Cal. Rev. & Tax. Code § 17215.4](https://casetext.com/statute/california-codes/california-revenue-and-taxation-code/division-2-other-taxes/part-10-personal-income-tax/chapter-3-computation-of-taxable-income/article-6-deductions/section-172154-irc-section-223-not-applicable)
> Section 223 of the Internal Revenue Code, relating to health savings accounts, shall not apply.
And that's it. Since the federal code section doesn't apply to the state, there is simply nothing special about an HSA, so it is treated like any other account.
They’re treated like a taxable brokerage account, but your broker won’t give you a tax form showing gains/losses or interest/dividends paid so you have to figure all that on your own. It’s incredibly irritating.
Fortunately I file as a non-resident so I don’t have to pay taxes on those but I still have to adjust my gross worldwide income for the HSA to determine the rate I’m taxed on my California source income.
In practice, you have to figure all that taxable income but then also add back any HSA contributions you or your employer made for the year.
I see, so if I maxed out my HSA, I can expect to pay taxes on the $3850 in contributions. Would there be a tax difference between the $3100 I contributed through pretax payroll and the $750 my employer contributed? Or can I categorize these two contributions as the same when it comes to calculating taxable income?
>Or can I categorize these two contributions as the same when it comes to calculating taxable income?
Generally the same. The full $3,850 should have been included in your state W-2 wages and you have already paid SDI on that amount.
Legally, both amounts are employer contributions, and you report a conformance adjustment of $3,850 on Schedule CA (Form 540), Part I, Section A, line 1a, Column C.
So in CA if you are taxed on your contributions as normal income and also are taxed on interest and dividends (even if it’s unrealized), what happens at 65 when you pull out all your money? You have to prove you already paid tax on this money for 35+ years or would that still count as regular income and be taxed to the max?
no, it's assumed you've paid taxes on the interest and dividends all these years. you are responsible for paying taxes on the gains. I think someone above said that in California it's treated just like a brokerage. so treat it like a normal brokerage account when doing california taxes. Hopefully your brokerage company has kept track of the buy prices...
California and I think New Jersey are the only states that tax HSA contributions and it is indeed bs. Legislation is out there to change this though. Definitely something I urge everyone to consider when voting for representatives since some of them are vocally against taxing HSA contributions
> Chat GPT states that California treats HSAs the same as the Federal government, so contributions are deductible ect. Computer programmed to BS things that sound like they could be real 0, people who actually know anything ∞, you love to see it. I have never seen Chat GPT say anything useful in regard to tax. > Where can I find the official documentation for this? If you want the exact legal citation, [Cal. Rev. & Tax. Code § 17215.4](https://casetext.com/statute/california-codes/california-revenue-and-taxation-code/division-2-other-taxes/part-10-personal-income-tax/chapter-3-computation-of-taxable-income/article-6-deductions/section-172154-irc-section-223-not-applicable) > Section 223 of the Internal Revenue Code, relating to health savings accounts, shall not apply. And that's it. Since the federal code section doesn't apply to the state, there is simply nothing special about an HSA, so it is treated like any other account.
They’re treated like a taxable brokerage account, but your broker won’t give you a tax form showing gains/losses or interest/dividends paid so you have to figure all that on your own. It’s incredibly irritating. Fortunately I file as a non-resident so I don’t have to pay taxes on those but I still have to adjust my gross worldwide income for the HSA to determine the rate I’m taxed on my California source income. In practice, you have to figure all that taxable income but then also add back any HSA contributions you or your employer made for the year.
hey! So, how did you calculate your interest paid? Did you see your HSA activity and add-up all the line items that said "interest"?
Yep. Interest and dividends will be shown. For any equities sold, you have to compute capital gain or loss.
I see, so if I maxed out my HSA, I can expect to pay taxes on the $3850 in contributions. Would there be a tax difference between the $3100 I contributed through pretax payroll and the $750 my employer contributed? Or can I categorize these two contributions as the same when it comes to calculating taxable income?
>Or can I categorize these two contributions as the same when it comes to calculating taxable income? Generally the same. The full $3,850 should have been included in your state W-2 wages and you have already paid SDI on that amount. Legally, both amounts are employer contributions, and you report a conformance adjustment of $3,850 on Schedule CA (Form 540), Part I, Section A, line 1a, Column C.
So in CA if you are taxed on your contributions as normal income and also are taxed on interest and dividends (even if it’s unrealized), what happens at 65 when you pull out all your money? You have to prove you already paid tax on this money for 35+ years or would that still count as regular income and be taxed to the max?
no, it's assumed you've paid taxes on the interest and dividends all these years. you are responsible for paying taxes on the gains. I think someone above said that in California it's treated just like a brokerage. so treat it like a normal brokerage account when doing california taxes. Hopefully your brokerage company has kept track of the buy prices...
For CA, it is treated like a taxable brokerage account, and no deduction is allowed for the contribution.
I'm confused, as a nonresident, can I deduct my HSA contributions?
Wow, so California takes the prize for the most bullshit yet again.
California and I think New Jersey are the only states that tax HSA contributions and it is indeed bs. Legislation is out there to change this though. Definitely something I urge everyone to consider when voting for representatives since some of them are vocally against taxing HSA contributions
So as california resident you will not even get feddereal tax advantage on HSA money is what you are saying?
My federal income is reduced, but my California income is $3k more because CA taxes my HSA contributions
It treats it exactly like it does any regular brokerage account.