No the distributions from an HSA that are used to pay qualified medical expenses aren't taxed.
HSA distributions used for anything other than qualified medical expenses are not only taxable, they're subject to an additional 20% penalty if you're not disabled or are under the age of 65. You should receive Form 1099-SA showing the distributions.
After you enter your 1099-SA, we'll ask Did you spend all the money you took out on medical expenses? If you answer Yes, the entire distribution in box 1 of your 1099-SA is nontaxable.
However, if you answer No, the portion that wasn't used for qualified medical expenses becomes taxable income. This income appears on Form 8889, line 16, and Schedule 1, line 8. The 20% additional penalty, if applicable, will show up on line 17b of your 8889 and Schedule 2, line 8.
Please see additional information in the link below:
Excess HSA Contribution
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