HSA Tax Benefits in California (2026)
California does NOT recognize HSA tax benefits. Contributions are taxed, and investment gains are taxable income.
State Income Tax
1%–13.3%
HSA Deduction
No
Growth Tax-Free
No
How California Treats HSAs
California does not conform to federal HSA tax treatment. HSA contributions are not deductible on your California state tax return. Investment earnings within the HSA are subject to California income tax and must be reported annually. Qualified withdrawals for medical expenses are still tax-free at the federal level, but you've already been taxed on the contributions and earnings at the state level. California treats HSAs similarly to regular investment accounts for state tax purposes.
Note: California residents should track HSA investment gains for state tax reporting. Consider the state tax impact when deciding contribution amounts.
California HSA FAQs
Are HSA contributions tax-deductible in California?
No. California does not allow a state income tax deduction for HSA contributions. You still receive the federal deduction.
What is the state income tax rate in California?
California's state income tax rate is 1%–13.3%.
Is HSA investment growth taxed in California?
Yes. California taxes HSA investment earnings annually as regular income.
This information is for general guidance only and does not constitute tax advice. State tax laws change frequently. Consult a tax professional for advice specific to your situation.
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