Author Topic: California HSA Earnings  (Read 3101 times)

Joel

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California HSA Earnings
« on: April 14, 2014, 06:10:50 PM »
I live in California, and I currently have an HSA account.

My contributions reduce my federal taxable income, but the contributions are added back to my california taxable income, and that income is taxed in california.

Additionally, interest earned and other earnings are subject to taxation in California.

Interest earned is easy to calculate as it shows up on the monthly statement.

What do those of you who have an investment account in their California HSA?

How are gains/losses tracked?

Are gains/losses only realized when they are sold? (normal treatment of investments in stocks)

Or, are gains/losses somehow realized at the end of the year?

Also, my understanding is that U.S. Treasury Bonds (and California municipal bonds) are not taxable in California, therefore, it would be make sense to invest in those funds in my HSA account, and then not have to pay takes on any dividends or capital gains on those accounts. Am I understanding that correctly?

I currently have approximately $30 in losses from my original investment in a total stock market index fund, before I changed my investment to a U.S Treasury Bond index fund. I want to make sure I will at least be able to capture that $30 in losses on my california taxable income. Otherwise, I should invest in stocks until I at least recoup the $30 in losses.

This is significant as my california marginal tax rate is 8%!

dragoncar

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Re: California HSA Earnings
« Reply #1 on: April 14, 2014, 06:34:44 PM »
Crap, I may have been messing this up for a couple years. 

More questions:
How does CA tax earnings in a brokerage window?
Can I write off the fees?  I pay more in fees than I earn in interest.  I also have mostly treasuries in this account.
« Last Edit: April 14, 2014, 06:36:30 PM by dragoncar »

Joel

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Re: California HSA Earnings
« Reply #2 on: April 14, 2014, 06:57:15 PM »
Yes. The fees. That's something that I would like to consider as something that is reducing my earnings subject to California taxation.

Anyone?

And what are you meaning about brokerage window?
« Last Edit: April 14, 2014, 06:59:43 PM by Joel »

Joel

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Re: California HSA Earnings
« Reply #3 on: April 14, 2014, 09:55:39 PM »
Here's what I can summarize:

1. You must add HSA contributions to your california taxable income.
2. You must add HSA interest to your california taxable income.
3. You must add HSA dividends to your california taxable income.
4. You must add realized capital gains/ to your california taxable income (and subtract losses). Therefore, you must track your cost basis and time period for all HSA investments.
5. Interest/dividends received from U.S. Treasury Bonds are tax-exempt in california. Therefore, it's best to hold U.S. Treasury bonds in your HSA account.
6. You must add realized capital gains on U.S. Treasury bonds to your california taxable income (and subtract losses).
7. HSA maintenance fees are not tax-deductible in california.

Can anyone confirm my findings? Or state otherwise?