Are HSAs tax-deductible at the state level?

In many cases, the answer is yes. As of February 2017, here are a list of caveats:

  1. HSA contributions are taxed by Alabama, California, and New Jersey.

  2. These states don’t have state income taxes so the state tax benefit is not applicable: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

  3. These states tax any HSA earnings (e.g., investment gains, interest earned), but not HSA contributions: New Hampshire and Tennessee.

We always recommend that you consult with a tax professional as this is not intended to provide tax or investment advice.

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