HSA and California Taxes

[jennykay]

Both my husband and I have officially left corporate life and have been evaluating plans on California's ACA site.

We started looking at an HSA-eligible plan, which would allow us to sock away some funds this year in preparation for next year's expenses. I did just read that CA treats HSAs as taxable accounts. Further, I saw a reference on Bogleheads that most HSA administrators don't track HSA dividends and gains well, which means accounting for them separately on CA taxes can be challenging.

Does anyone here have an HSA in CA? Could you provide any feedback on how it's been for you to account for an HSA on CA taxes? I'm thinking some evaluation of HSA Administrators and their available reporting is in my near future. Trying to evaluate benefits vs. PITA of the HSA here. Thanks!

 

[Ginny]

I set up an HSA through Vanguard last year. Health Savings Administrators is the name and they are tracking the investment gains and the fees.

 

[Chris7]

At this point, our HSA is just invested in a simple savings account. I use Turbo Tax and for CA it just adds the contributions I made back in as taxable income.

I'm not sure why CA doesn't recognize HSA. It is very frustrating, but at least still get the break on the Federal side.

cd :O)

 

[kaneohe]

I've only had a savings account so I don't know how HSA custodians report on dividends/CGs/etc. but I can't imagine it would be too different than IRAs where those things are very clearly reported. Talk is cheap since I haven't actually dealt with dividends/CGs /etc in an HSA but , although there certainly is opportunity for confusion, it seems like if you keep a separate accounting for CA (as if it were a taxable account), things should be much simpler. It's not like you have to keep 2 accountings either......the Fed HSA is like an IRA so there is no basis and everything that comes out is either taxable or not, depending on if it's for qualified expenses or not so you don't have to track very much for Federal.

You will have to remember to make the CA adjustments but those should come straight from your CA accounting........additional income due to not deducting contributions and adding dividends/CGs/etc.........and when you do sell,
possible CGs but also a basis due to contributions and reinvestments.

 

[RobbieB]

CA does not recognize HSA.

I use mine 100% for authorized stuff (co-pays, Rx, and dental) and I do not do investments so it's pretty easy. Turbo tax does it all when I input the data from the HSA forms at the end of the year.

 

[jennykay]

Thanks for your input. We are already TurboTax users and it sounds like finding an administrator with good reporting will not be too difficult. Onto the research!