CA SB230

Allows California residents to deduct health savings account contributions from adjusted gross income for taxable years beginning January 1, 2025 through December 31, 2029, conforming to modified federal law.

Limits the deduction to eligible individuals with adjusted gross income below $87,000 for joint filers and heads of household, or below $42,000 for other individuals, with income thresholds indexed annually.

Modifies federal health savings account rules by reducing the additional tax penalty on non-qualified distributions from 20 percent to 2.5 percent and allowing penalty-free distributions for funds previously contributed by ineligible individuals.

Requires high deductible health plan providers to report plan information to the Franchise Tax Board and beneficiaries in a form specified by the board.

Directs the Franchise Tax Board to report biennially on the number and dollar amount of deductions claimed to assess whether the tax incentive achieves its goals of increasing health savings and reducing health-related debt.