In 2023 I took a $2,500 distribution from my HSA. I have accumulated HSA-eligible medical expenses over a period of 10 years following the establishment of my HSA amounting to $30,000. In 2023 I have large medical expenses which can be included as an itemized deduction. Turbotax is applying the $2,500 HSA distribution as an offset to my 2023 medical expenses, which effectively reduces my 2023 medical tax deduction. My understanding is that the 2023 HSA distribution can be applied against any of my HSA medical expenses, including those that arose prior to 2023. The software does not appear to be allow me to make this type of designation. My workaround would be to inflate my 2023 medical expenses by $2,500 so that the net deduction is correct (meaning that I am applying the HSA distribution to pre-2023 medical expenses).
Thoughts?
