Reporting HSA dividends in CA

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l1am
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Reporting HSA dividends in CA

Post by l1am » Sat Nov 02, 2019 2:20 pm

Just learned about this and missed it in my 2018 state return :(, probably owe a few dollars in tax.

Should I just manually add up the dividends and report an amendment, 540?

nalor511
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Re: Reporting HSA dividends in CA

Post by nalor511 » Sat Nov 02, 2019 2:43 pm

I cannot help with this year, except to say that I expect you'd have to amend with the correct numbers.

For next year, you could move your holdings into something not taxable in CA (such as Treasuries, or a treasury MMF), and then you wouldn't have anything to report to CA going forward

fabdog
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Re: Reporting HSA dividends in CA

Post by fabdog » Sat Nov 02, 2019 2:46 pm

If you had HSA contributions that came off your federal return, those also need to be added back to your income.

And yes, you need to total up the dividends and add those as well. So an amended 540 would be in order.

Harry Sit (The Finance Buff) has a good article on CA (and NJ) treatment of HSA's

https://thefinancebuff.com/california-n ... eturn.html

Mike

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grabiner
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Re: Reporting HSA dividends in CA

Post by grabiner » Sat Nov 02, 2019 2:58 pm

fabdog wrote:
Sat Nov 02, 2019 2:46 pm
Harry Sit (The Finance Buff) has a good article on CA (and NJ) treatment of HSA's

https://thefinancebuff.com/california-n ... eturn.html
One addition I would make. The advice "Don't sell when you have a loss" simplifies the accounting, but may cost you money, particularly in NJ. In NJ, capital losses cannot be carried over, but they can offset gains in the same year. Therefore, if you happen to have a $5000 unrealized capital loss in your HSA and a $5000 realized capital gain outside the HSA, you can save the NJ tax on the $5000 by selling for a loss in the same year. (This won't work if you have a Treasury fund, as NJ taxes neither gains nor losses on Treasuries.)
Wiki David Grabiner

Topic Author
l1am
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Re: Reporting HSA dividends in CA

Post by l1am » Sat Nov 02, 2019 6:13 pm

fabdog wrote:
Sat Nov 02, 2019 2:46 pm
If you had HSA contributions that came off your federal return, those also need to be added back to your income.

And yes, you need to total up the dividends and add those as well. So an amended 540 would be in order.

Harry Sit (The Finance Buff) has a good article on CA (and NJ) treatment of HSA's

https://thefinancebuff.com/california-n ... eturn.html

Mike
I had no contributions to HSA, just had one with some investments.

I have an amendment ready to submit, such a pain for a few dollars. Need to mail everything.

mervinj7
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Re: Reporting HSA dividends in CA

Post by mervinj7 » Sat Nov 02, 2019 6:37 pm

l1am wrote:
Sat Nov 02, 2019 6:13 pm
I had no contributions to HSA, just had one with some investments.

I have an amendment ready to submit, such a pain for a few dollars. Need to mail everything.
What are you planning for this year and next with the HSA?

Topic Author
l1am
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Re: Reporting HSA dividends in CA

Post by l1am » Sat Nov 02, 2019 6:44 pm

mervinj7 wrote:
Sat Nov 02, 2019 6:37 pm
What are you planning for this year and next with the HSA?
Same, I'll just report the dividends and interest to CA.

mervinj7
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Re: Reporting HSA dividends in CA

Post by mervinj7 » Sat Nov 02, 2019 7:02 pm

l1am wrote:
Sat Nov 02, 2019 6:44 pm
mervinj7 wrote:
Sat Nov 02, 2019 6:37 pm
What are you planning for this year and next with the HSA?
Same, I'll just report the dividends and interest to CA.
Have you considered just using US Treasuries to avoid CA taxes?

Topic Author
l1am
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Re: Reporting HSA dividends in CA

Post by l1am » Sat Nov 02, 2019 7:48 pm

mervinj7 wrote:
Sat Nov 02, 2019 7:02 pm
Have you considered just using US Treasuries to avoid CA taxes?
I have, but I'd rather have an aggressive investment in there. It should still come out ahead even with the dividend state tax.

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grabiner
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Re: Reporting HSA dividends in CA

Post by grabiner » Sun Nov 03, 2019 9:41 am

l1am wrote:
Sat Nov 02, 2019 7:48 pm
mervinj7 wrote:
Sat Nov 02, 2019 7:02 pm
Have you considered just using US Treasuries to avoid CA taxes?
I have, but I'd rather have an aggressive investment in there. It should still come out ahead even with the dividend state tax.
If you treat the HSA as part of your portfolio, and you hold Treasuries somewhere, you might as well hold them in the HSA for the tax benefit. That is, while stocks in your HSA are likely to outperform Treasuries there, Treasuries in the HSA and stocks and corporate bonds in your IRA/401(k) has a tax advantage over any other location for the same portfolio.

However, if you have an unusually good fixed-income option elsewhere (TSP G fund, TIAA Traditional Annuity), it's probably worth holding that fixed-income option.
Wiki David Grabiner

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