How Does California Treat HSA Accounts?

Health Savings Accounts (HSAs) provide individuals with a tax-advantaged way to save money for medical expenses. However, each state may have its regulations on how HSAs are treated. When it comes to California, here is how HSA accounts are treated:

California does not conform to the federal tax treatment of HSAs. This means that while contributions to HSAs are tax-deductible on a federal level, California does not offer the same tax benefit at the state level.

Additionally, interest and investment earnings on HSA funds are also not taxable at the federal level, but in California, they are subject to state income tax.

Withdrawals for qualified medical expenses remain tax-free both federally and at the state level in California.

Health Savings Accounts (HSAs) are an essential tool for managing healthcare costs. In California, it's crucial to understand how these accounts differ from federal regulations.