It’s not a mistake to use the HSA, it’s just that you have to account for the assumptions that TurboTax makes.
Remember that your HSA is completely tax-deductible when you make the contributions, and if you make the contributions by via payroll deduction, it is also exempt from the additional 7.65% Social Security and Medicare tax. Your itemized deduction for medical expenses only saves you the federal income tax, may save you state income tax depending on your state, but does not save you the Social Security and Medicare tax. And, the itemized medical expense deduction is subject to the 7.5% floor so it will never be as beneficial to you as the HSA.
if you did not fully maximize contributions to your HSA now, which is $7100 for 2020 if you have a family insurance plan, you can make a deposit now as a 2020 contribution as long as it is made before April 15. You can then immediately withdraw the money to reimburse yourself for your prior unreimbursed medical expenses. In effect, you “wash“ some money through the HSA to get a immediate tax deduction. You should also maximize your HSA contributions for 2021. Just be aware that in order to make a contribution for 2020, you may have to make a special selection on the website or use a special form when mailing a check.
