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RD
RD, Certified Public Accountant (CPA)
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Im a US resident alien with FL residence. I have an HSA in

Customer Question

I'm a US resident alien with FL residence. I have an HSA in CA but am not a CA resident.
1) Is the interest taxable by CA?
2) Are contributions to it (from non-CA sourced income) taxable by CA?

For 2:
According to the section entitled "Interest & Dividends" of http://www.flatworldknowledge.com/pub/1.0/fundamentals-income-tax-theory/30994, it would seem the answer is for the most part "No"... but http://www.benefitscafe.com/articles/taxtreatment.html contradicts this and the 3rd bullet in the 1st column of p6 for the instructions for "Schedule CA Form 540NR" (Non-Residents) http://www.ftb.ca.gov/forms/2008/08_540nrcains.pdf basically says 'CA doesn't allow a deduction for contributions to an HSA' .

In regards XXXXX XXXXX 1 & 2:
When I called www.ftb.ca.gov to ask them this question, they said "No", but then again they said I wouldn't owe any taxes on the interest earned either?

Here is a link to all the CA tax forms: http://www.ftb.ca.gov/forms/2008/index.shtml
Submitted: 5 years ago.
Category: Tax
Expert:  RD replied 5 years ago.
Do you have CA source income that requires you to file a Non resident tax return in CA?
Customer: replied 5 years ago.
I guess that's part of my confusion, does CA consider interest income from an HSA account in CA as "California source"? If not, then the answer is "No". Besides that I have no other income generated/earned in CA.

Thanks
Expert:  RD replied 5 years ago.
No, interest income is sourced based on your State of residence. SO, if you are a FL resident that your interest income is taxable in FL (which does not have individual income tax) and not in CA.

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

Customer: replied 5 years ago.
Thanks! What about question 2? (that was really my main question)

Specifically, can you comment on the 3rd bullet in the 1st column of p6 for the instructions for "Schedule CA Form 540NR" (Non-Residents) http://www.ftb.ca.gov/forms/2008/08_540nrcains.pdf where it basically says 'CA doesn't allow a deduction for contributions to an HSA'?

Lastly, if can provide references for these answers, I would greatly appreciate it (ie: links to CA tax code perhaps)

Thanks!
Expert:  RD replied 5 years ago.
Contribution to HSA is deductible for Federal tax and not deductible for CA State tax. SO if you file a Federal tax return and are also required to file CA State tax return than you need to add back the HSA deduction to the Federal Income to determine CA State income subject to tax.

It does not mean that the interest on HSA or contribution to HSA is taxable for CA State tax return.

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

Customer: replied 5 years ago.
Thanks once again, can you provide references to back your answers? If not that, can I have your full name or firm name so that I may reference you if I get audited?

The reason I ask is because I keep reading information that contradicts your response (ie: http://74.125.47.132/search?q=cache:TxxhlMYbHp8J:www.insurance.ca.gov/0100-consumers/0070-health-issues/glossary.cfm+tax+treatment+for+%22non-resident%22+hsa+contributions+in+california&cd=2&hl=en&ct=clnk&gl=us , or http://74.125.47.132/search?q=cache:KjffIlCecCoJ:www.sfgate.com/cgi-bin/article.cgi%3Ff%3D/c/a/2006/04/06/BUG1NI41OI1.DTL+tax+treatment+for+non-resident+hsa+contributions+in+california&cd=8&hl=en&ct=clnk&gl=us )

I guess the one thing that is different in my situation is that I am not a CA resident, which may be what's important?
Expert:  RD replied 5 years ago.
Non residents are taxable only on the CA State source income. Here is a link to details on Source of income and taxability

http://www.flatworldknowledge.com/b/fundamentals-income-tax-theory/california-part-year-and-non-r/california-residency

You can get my details from my profile page.


Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
Customer: replied 5 years ago.
Thanks, XXXXX XXXXX was looking for a reference other than the one I provided (ie: something more official like a link to CA tax code).

I ended up finding the answer myself, but thanks for your assistance.

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