My wife and I have separate HSA accounts. She contributes pre-tax dollars, and I contribute post-tax dollars to my HSA account. Due to a special state stipend, my wife's employer made an additional HSA contribution, bringing our total contribution to about $1,100 in excess of the 2025 HSA contribution limit. I can request my custodian to return the post-tax dollars as a return of excess contribution (1099-SA, distribution code 2).
My issue is that if I do so, the $1,100 principal + earnings will be treated as 'other income' by TurboTax, and I will now be taxed on the $1,100 that was already taxed once, since it is part of the post-tax contribution. I realize that I have to pay taxes on the earnings, and that makes sense to me. Is there any way to avoid the double taxation on the $1,100 in TurboTax?
