"If $1800 is taken from account or spent on non-medical is 20% penalty on $ 1800 only or on total income for that year ?"
The 20% penalty is only on that portion of the HSA distribution that was not for qualified medical expenses, so if I understand your situation correctly, that would be a penalty of $360.
"Does penalty applies if HSA owner is over 66 years old? "
If the owner of the HSA is 65 or older, than any penalty on HSA distributions for non-qualified medical expenses is waived. In this case, the money in the HSA is treated like a distribution from an IRA, if the distribution is for non-qualified medical expenses. This means, of course, that the distribution will in any case be added to your taxable income to possibly pay federal income tax.
