HSA Earnings in California

[vsridhar]

The TurboTax screen for filing with an HSA in California asks me for the following information. There's no information on where I should pull these values from - is it my December statement, or do I add up the values for the whole year? It's not in my 1099-SA or 5498-SA.

• Interest earned from HSA
• Dividends earned from HSA
• Net capital gain or loss from HSA

[BillM223]

The 1099-SA and the 5498-SA are federal forms for HSAs.

However, California does not recognize the special nature of HSAs as pre-tax medical accounts. Instead, California insists that you treat the HSA as a regular investment account (i.e. taxable).

I doubt that any of the statements that you received from the HSA custodian has the information you need.

Instead, you need to contact your HSA custodian and ask to speak to a customer service rep who deals with customers in California and New Jersey (the other state that doesn't recognize HSAs). I have to hope that someone at your HSA custodian understands the situation and tell you what interest, dividends, and capital gains you would have earned had the HSA not been tax-sheltered.

If no one at your HSA custodian knows what I am talking about - switch to another custodian preferably based in California so they know what I am talking about.

[usme84fv84]

@ BillM223

I live in California. I am using TurboTax Online Premier. I can not find where to review and edit the interest, dividend and capital gains from my HSA account, within Turbotax, so that it is included as taxable income on my state tax return. Could you provide more detailed information; i.e. a step-by-step procedure on where to find this information in this version of TurboTax?

Thanks,

Curt

[BillM223]

Proceed through the California interview. You will come to a screen with the heading "Here's the income that California handles differently".

Scroll down to the subheading "Investments", and click on Start for "Health Savings Account (HSA) Earnings".

The very next screen will ask you about interest, dividends, and capital gains from your HSA.

[usme84fv84]

BillM223

I have finished the California interview process and I don't/can't find any option that mentions "Here's the income that California handles differently". I do find my HSA contribution, total distributions, taxable distributions, taxable earnings on excess contributions, tax-free employer contributions and excess employer contributions withdrawn. But nothing for entering interest, dividends and capital gains for an HSA.

Can you try this in the Online Premier version of TurboTax. I have a suspicion that the user interface may be different from the desktop version, which I assume your directions apply to.

Thanks,

Curt

[BillM223]

The desktop interface for the desktop software is indeed often different...however, I specifically just did this on my test return under Online Premier, so the instructions are specifically for you.

OK, so let's see what else is different.

Are you filing a resident return in California?

Did you see a screen with the heading of "Let's see how California taxes income"? This screen is immediately before the screen I referred to.

I am not going to go through every possible screen in the CA interview, because the screens that appear are based somewhat on the data that you have already entered.

If you are filing a resident return, you must have seen one of these two screens.

[usme84fv84]

I do need to file a California tax return for 2020.

I may have seen one of those screens during the interview process, but that was many days ago so I can't be sure.

What I need to know is how to get back intoTurbotax and review/edit this information for my HSA and state tax return. There must be another way after the interview process is completed.

[usme84fv84]

Thanks for your help.

I found the place to enter this information. I had to select Ste -> Your State Return -> Edit Income and Adjustments -> Edit Health Savings Account (HSA) Earning.

[luludeyang]

Thanks for the information! Where to enter capital gains then?

[CatinaT1]

You are posting on an old thread related to HSAs. Can you clarify your question about capital gains? Did you receive a specific tax form you are trying to enter?

Guide to Schedule D: Capital Gains and Losses

[happyfeifei]

Hi Catina, thanks for your response.  No, I didn't receive a form for my HSA account.  It's just based on my investment reports from Fidelity that my 2022 HSA investment (mutual funds) yielded an overall income of ~$1300, including a long-term capital gain of ~$1000, a short-term capital gain of ~$100, and a dividend of ~$200.  Considering that the California state return on PC Turbotax only has one page for HSA earnings (with only 3 fields "Interest earned from HSA", "Dividends earned from HSA, and Net capital gain or loss from HSA"), I wonder how to enter my long-term and short-term capital gain as they should be treated differently for tax purposes.  The mutual funds also had an unrealized loss of ~$4000 but I guess I cannot report it as it's not unrealized.  Any advice?  Thanks again!

[BillM223]

I think you already have seen this, but long-term capital gains and short-term capital gains are both taxed as ordinary income in California, so enter both into the box in the CA interview labelled "capital gains".

[happyfeifei]

Thanks for your confirmation!

[shiyi11]

If you are a HealthEquity for HSA user, follow this 

https://ttlc.intuit.com/community/taxes/discussion/re-calculate-hsa-net-capital-gain-or-loss-for-ca-...

[Weasley_]

I talked to the HSA rep who showed me a calculator for capital gain! You just have to download that report and upload it to the calculator. Hopefully this helps others: 

https://learn2.healthequity.com/google/hsa/investment-income-calculator