CA - Health Savings Account Conformity

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California Health Savings Accounts

California does not conform to the portion of §223 of the IRC that permits eligible individuals to establish Health Savings Accounts (HSA’s) for taxable years beginning on or after January 1, 2004. This was added in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. For federal purposes, HSA contributions are deductible from AGI, the contributions grow tax-free over the years, and amounts can be distributed tax-free to pay or reimburse qualified medical expenses.

California requires that the deduction for HSAs claimed on the federal return (Form 1040, Line 28) be added back on Schedule CA or CA-NR, Line 28. Also, earnings from an HSA and rollovers from an MSA to an HSA are added to income on Schedule CA or CA-NR.

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