"Why do I have to pay tax on the HSA contributions? "
You don't have to pay tax on your HSA contribution, and you won't pay taxes on your HSA contribution when you tell TurboTax that you're covered by a qualifying HDHP.
When you enter that information off your W-2 TurboTax doesn't know if you're covered or not. Pending an answer to that question it kicks the deduction over to "Other income" (line 21 of the Form 1040) and your tax goes up. Once you work through the HDHP/HSA questions over in the "Credits and Deductions" area TurboTax will reverse that entry and your taxes will go back down.
Tom Young
