Hi @Opus 17 - I am seeing mixed answers regarding a similar situation for me (or maybe I just misunderstood).
I interpreted that the earnings on 2023 excess contributions that were not removed by April 2024, but instead December 2024, are not taxable in 2024 and essentially become tax-free. The logic being this:
Form 5329, Line 42 - Excess from 2023: $3,850
I only need $3,850 on Line 44 (2024 distributions) to eliminate this prior year excess, which comes from Line 16 of Form 8889, Taxable HSA Distributions. But if my total distribution was $4,098 on Line 14a, I can state $248 of qualified medical expenses on Line 15 to not have to pay tax & penalty on the $248. I assumed this $248 would wind up somewhere else on the return to be taxed. Is this not the case?
