for 2023 the excess will be income. In addition, there will be a 6% penalty (form 5329)based on the lower of the excess contribution or the fair value of your HSA on 12/31/2023 unless you withdraw the excess and earnings thereon by the due date of your return. The way form 5329 works, only taxable ( non-qualified) 2023 distributions are applied to any 2022 excess, not to any 2023 excess) form 5329 line 44. in 2024 and subsequent years non-qualified distributions will be applied to the 2023 excess not qualified distributions so failure to withdraw that excess in 2024 will result in a 6% penalty every year. Non-qualified distributions are subject to income tax
