Why HSA is shown as income in turbo tax? I used all my HSA contribution for medical use.

[SweetieJean]

Have you entered your medical expenses?

[abalwani]

Yes I have .

[dmertz]

All HSA distributions are considered income, but if they are used entirely for qualified medical expenses, they are excluded from taxable income.  If you indicate in the follow-up to entering the Form 1099-SA that any portion was not used for qualified medical expenses, this portion will appear on Form 1040 line 21 as miscellaneous taxable income and, if you were under age 65 at the time of the distribution, you'll also have a 20% early-distribution penalty on this portion shown on Form 1040 line 62.

If you made contributions to an HSA through your employer for 2017, reported with code W in box 12 of your W-2, TurboTax will treat these contributions as excess contributions subject to tax (on Form 1040 line 21) and penalty (on Form 1040 line 59 from Form 5329 Part VII) until you complete the HSA section of the interview to establish your eligibility for the contributions.

[Opus 17]

Your HSA withdrawals (form 1099-SA) are income until you get to the question "did you use all these withdrawals for qualified medical expenses."

Your HSA contributions (employer plus payroll contributions are in your W-2 box 12, out of pocket contributions are entered separately) will be added back to your taxable income unless you complete the health insurance section to verify that you were eligible to make HSA contributions (had qualifying insurance the whole year, etc.)

If you are entering things out of order, you may have missed one of those questions.  Also, there may be a transfer bug involving the "last month rule" if you transferred your info from last year's return.  Try running the 1099-SA income section, the medical expense section, and the health insurance tab, over again, not skipping any steps.