What amount of the distribution from an Archer MSA to a Health Savings Account is subject to California income tax?

What amount of the distribution from an Archer MSA to a Health Savings Account is subject to California income tax?

• A. $1,250
• B. $125
• C. $1,500
• D. $0

Answer: (B)

In the context of California income tax law, distributions from an Archer Medical Savings Account (MSA) to a Health Savings Account (HSA) can have specific tax implications. When considering the transfer amounts, California does not conform to the federal treatment of Archer MSAs and HSAs. The key aspect is that California does not recognize the tax-free transfer of funds from an Archer MSA to an HSA. Instead, any distribution from an Archer MSA that is made in this context is treated as taxable income to the extent of the distribution amount. Therefore, in this scenario, any amount that is distributed from the Archer MSA to the HSA is treated as taxable income under California state law. Given this, the correct answer reflects an amount that would be subject to taxation. A distribution of $125 would be considered taxable under California law when transferred from an Archer MSA to an HSA, thus making that amount the correct choice in the context of the question. This differentiation from federal tax law is crucial for understanding how California specifically treats these types of distributions.

In the context of California income tax law, distributions from an Archer Medical Savings Account (MSA) to a Health Savings Account (HSA) can have specific tax implications. When considering the transfer amounts, California does not conform to the federal treatment of Archer MSAs and HSAs.

The key aspect is that California does not recognize the tax-free transfer of funds from an Archer MSA to an HSA. Instead, any distribution from an Archer MSA that is made in this context is treated as taxable income to the extent of the distribution amount. Therefore, in this scenario, any amount that is distributed from the Archer MSA to the HSA is treated as taxable income under California state law.

Given this, the correct answer reflects an amount that would be subject to taxation. A distribution of $125 would be considered taxable under California law when transferred from an Archer MSA to an HSA, thus making that amount the correct choice in the context of the question. This differentiation from federal tax law is crucial for understanding how California specifically treats these types of distributions.