California taxable income: should HSA contributions be added back or not?

Elaine Member Newcomer

Hi, when preparing my California state tax in FreeTaxUSA, I noticed that the software is treating my HSA contributions as "California Additions to Income", hence it increased my California taxable income. However, I looked up on the California Franchise Tax Board website, and it looks like a bill was passed in 2022 to exclude HSA contributions from California taxable income. Is my understanding correct? Please see link to the bill below:


  • KeriC
    KeriC FreeTaxUSA Agent

    Thanks for asking. The bill that you linked to was a proposed bill, but the bill did not pass. It is correct to have your HSA contributions added to your CA taxable income since the state does not conform to the IRS' treatment of the contributions as pre-tax.