My wife had a HDHP with a self funded HSA at the beginning of 2021. In January we funded it for the full allowed amount ($4,600). By May we had used the full amount of $4,600 on legitimate medical expenses. In August we moved to another state and did not enroll my wife in a HDHP (at the time I did not understand that the allowed HSA deduction was calculated on a monthly basis).
When I finished the TT interview for this item, TT said I had a $3,450 HSA deduction (9/12*4,600), calculated the medical deduction for Schedule A based on medical expenses minus 4,600 and no penalty. Is this correct? Or do I show that I made a withdrawal of $1,150 (4,600 - 3,450) before taxes are due (so that it matches the allowed deduction) and show a Schedule A deduction of medical expenses minus $3,450?
