So, to confirm, TurboTax calculated $1,500? If so, this is good news.
You have two ways to deal with this excess:
1. Withdraw the excess before April 15th. I don't know if you have enough cash in the HSA to do this, and I don't know how the HSA custodian will respond to your change of plans. If you can withdraw the entire excess, then there is no carryover and no 6% penalty.
2. Carryover part or all of your current year excess contribution. This carryover amount will be assessed a 6% penalty.
Then, in year 2025, make room for the carryover to be treated like a personal contribution - that is, make sure that you reduce what you would have otherwise contributed so that carryover+2025 contributions is less than or equal to the annual HSA contribution limit in 2025. In this way, the carryover is "used up" and there will be no more 6%.
As for what I think you mean by "earned income tax", the moment that TurboTax detected the excess contributions, IF the contributions were all listed on your W-2(s), then the excess is added to Other Income to be taxed. Why? Because the code W amounts were removed from Wages in boxes 1, 3, and 5 when the W-2 was printed. That is, the code W amounts would have been tax-free, so if they are in excess, they need to be added to Income to be taxed.
But if you carryover the excess to 2025, then if the carryover can be used in 2025, it will appear as a deduction on line 13 Schedule 1 (1040)...so your income will indeed be reduced in 2025.
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