HSA investing in CA

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
babyvinny
Posts: 36
Joined: Thu Nov 14, 2019 2:40 pm

HSA investing in CA

Post by babyvinny »

Hi all, I don't know what to do with my HSA accounts. I read some posts here, but I'm very still confused. Please correct me if I misunderstood some of the information, and really appreciate any suggestions you all have.

I have 2 HSA accounts:
1. opened in 2013, stopped contributing in 2014. About $6k, was invested with in a mutual fund with TD Ameritrade (HSAbank). Recently, I cashed out the fund, roll over the money to Fidelity, still in cash right now.
2. opened in 2014, stopped contributing in 2016. About $20k, investing in a mutual fund with a different administrator (sorry, my brain is pretty dead right now, can't remember the name). Not much done for this account.

My question is, I'm from California, and just learned recently that I have to pay capital gain on HSA investment. From what I'm reading, I have to file amended return every single year for each account. Is that correct? even though I didn't touch the accounts or get any distribution from the gain previously? If so, is it complicated to file the amended return? I want to learn and have been doing tax return myself, but if it is complicated, I wouldn't want to make mistakes, and cause more confusion.
Another question is what should I invest in now? I want to simplify state tax paperwork if possible. I read some posts, but still don't understand most of them, so please be patient with me.
Thank you.
User avatar
big bang
Posts: 102
Joined: Mon Jul 25, 2016 8:33 pm

Re: HSA investing in CA

Post by big bang »

If you are with Fidelity, this is what I am using for my HSA:
FUAMX (Fidelity Interm Treasury Bd Index)
Treasuries are exempt from state taxes, so you do not need to do any bookkeeping.
(1) save a lot, (2) select an asset allocation containing both stock and bond asset classes, (3) buy low cost, widely diversified funds, (4) allocate funds tax-efficiently, and (5) stay the course.
nalor511
Posts: 970
Joined: Mon Jul 27, 2015 1:00 am

Re: HSA investing in CA

Post by nalor511 »

big bang wrote: Thu Dec 05, 2019 2:37 pm If you are with Fidelity, this is what I am using for my HSA:
FUAMX (Fidelity Interm Treasury Bd Index)
Treasuries are exempt from state taxes, so you do not need to do any bookkeeping.
Treasury funds at FIDO have capital gains, which you need to report in CA every year, FIDO won't report this for you, you have to do it.

I like the recommendation of buying treasuries directly and using FIDO auto roll. It's super easy. No capital gains or CA reporting required.
User avatar
big bang
Posts: 102
Joined: Mon Jul 25, 2016 8:33 pm

Re: HSA investing in CA

Post by big bang »

nalor511 wrote: Thu Dec 05, 2019 3:28 pm
big bang wrote: Thu Dec 05, 2019 2:37 pm If you are with Fidelity, this is what I am using for my HSA:
FUAMX (Fidelity Interm Treasury Bd Index)
Treasuries are exempt from state taxes, so you do not need to do any bookkeeping.
Treasury funds at FIDO have capital gains, which you need to report in CA every year, FIDO won't report this for you, you have to do it.

I like the recommendation of buying treasuries directly and using FIDO auto roll. It's super easy. No capital gains or CA reporting required.
Hmm... I just rechecked Morningstar's performance and distribution screens and I do not see any short or long term capital gains.
https://www.morningstar.com/funds/xnas/ ... erformance
Please confirm if you see the same thing.
(1) save a lot, (2) select an asset allocation containing both stock and bond asset classes, (3) buy low cost, widely diversified funds, (4) allocate funds tax-efficiently, and (5) stay the course.
mervinj7
Posts: 1571
Joined: Thu Mar 27, 2014 3:10 pm

Re: HSA investing in CA

Post by mervinj7 »

big bang wrote: Thu Dec 05, 2019 3:47 pm
nalor511 wrote: Thu Dec 05, 2019 3:28 pm
big bang wrote: Thu Dec 05, 2019 2:37 pm If you are with Fidelity, this is what I am using for my HSA:
FUAMX (Fidelity Interm Treasury Bd Index)
Treasuries are exempt from state taxes, so you do not need to do any bookkeeping.
Treasury funds at FIDO have capital gains, which you need to report in CA every year, FIDO won't report this for you, you have to do it.

I like the recommendation of buying treasuries directly and using FIDO auto roll. It's super easy. No capital gains or CA reporting required.
Hmm... I just rechecked Morningstar's performance and distribution screens and I do not see any short or long term capital gains.
https://www.morningstar.com/funds/xnas/ ... erformance
Please confirm if you see the same thing.
FUAMX had a (small) capital gains distribution in 2016. The morningstar link only shows data from 2017 to 2019. After 2017, I switched to an auto-rolling Treasury ladder to avoid this exact (but minor) issue. Other CA HSA tax-free alternatives includes treasury ETFs like SHV or GOVT.

Code: Select all

Date		Per Share Amount	Reinvestment Price
12/02/16	$0.075			$10.67
https://fundresearch.fidelity.com/mutua ... /31635V257
Topic Author
babyvinny
Posts: 36
Joined: Thu Nov 14, 2019 2:40 pm

Re: HSA investing in CA

Post by babyvinny »

nalor511 wrote: Thu Dec 05, 2019 3:28 pm
big bang wrote: Thu Dec 05, 2019 2:37 pm If you are with Fidelity, this is what I am using for my HSA:
FUAMX (Fidelity Interm Treasury Bd Index)
Treasuries are exempt from state taxes, so you do not need to do any bookkeeping.
Treasury funds at FIDO have capital gains, which you need to report in CA every year, FIDO won't report this for you, you have to do it.

I like the recommendation of buying treasuries directly and using FIDO auto roll. It's super easy. No capital gains or CA reporting required.
Would you mind breaking it down step by step? I'm confused as how can I buy treasuries directly when my money is tight with Fidelity? I found this blog post, is it how you do it? https://thefinancebuff.com/treasury-bil ... arket.html
Thanks.
mervinj7
Posts: 1571
Joined: Thu Mar 27, 2014 3:10 pm

Re: HSA investing in CA

Post by mervinj7 »

babyvinny wrote: Thu Dec 05, 2019 5:48 pm
nalor511 wrote: Thu Dec 05, 2019 3:28 pm
big bang wrote: Thu Dec 05, 2019 2:37 pm If you are with Fidelity, this is what I am using for my HSA:
FUAMX (Fidelity Interm Treasury Bd Index)
Treasuries are exempt from state taxes, so you do not need to do any bookkeeping.
Treasury funds at FIDO have capital gains, which you need to report in CA every year, FIDO won't report this for you, you have to do it.

I like the recommendation of buying treasuries directly and using FIDO auto roll. It's super easy. No capital gains or CA reporting required.
Would you mind breaking it down step by step? I'm confused as how can I buy treasuries directly when my money is tight with Fidelity? I found this blog post, is it how you do it? https://thefinancebuff.com/treasury-bil ... arket.html
Thanks.
See my previous post on this topic.
viewtopic.php?t=279583#p4512140
Post Reply