HSA Excess Contribution

[user17670721801]

My wife and I have separate HSA accounts. She contributes pre-tax dollars, and I contribute post-tax dollars to my HSA account. Due to a special state stipend, my wife's employer made an additional HSA contribution, bringing our total contribution to about $1,100 in excess of the 2025 HSA contribution limit. I can request my custodian to return the post-tax dollars as a return of excess contribution (1099-SA, distribution code 2). 

My issue is that if I do so, the $1,100 principal + earnings will be treated as 'other income' by TurboTax, and I will now be taxed on the $1,100 that was already taxed once, since it is part of the post-tax contribution. I realize that I have to pay taxes on the earnings, and that makes sense to me. Is there any way to avoid the double taxation on the $1,100 in TurboTax?

[Mike9241]

was the health plan with her employer a family plan or self-only? was your personal plan self-only, family or were you covered by her family plan?.

the issue is that with a self-only coverage the maximum is $4300 for her account (not over 55). the same applies to your account if you had self-only coverage. however if either of you had family coverage ($8550 max which can be split anyway you want between the two accounts. you indicate on both family coverage on both HSA forms.

each person can contribute an extra 41000 to their HSA account if 55 or oleder on 12/31/2025.

with self-only coverage (both) any excess must be removed from that account. 

[user17670721801]

My wife's plan is a family HDHP plan. I am covered under her plan, so I elected to decline the health plan offered by my employer. As outlined in the original post, we were on target to contribute to the annual limit until this stipend. My question remains:

My issue is that if I request the custodian for the excess contribution, the $1,100 principal + earnings will be treated as 'other income' by TurboTax, and I will now be taxed on the $1,100 that was already taxed once, since it is part of the post-tax contribution. I realize that I have to pay taxes on the earnings, and that makes sense to me. Is there any way to avoid the double taxation on the $1,100 in TurboTax?

I appreciate guidance from this group.

Thank you in advance.

[Mike9241]

you misunderstand or are doing something wrong becuase the $1150 excess is being withdrawn from your post tax contributions to your HSA. both HSA worksheets must be marked as family coverage

Example

her w-2  with code W - HSA $5400 includes $1100 contributed by employer (box 1 of w-2 reduced by $4300 her contribution to HSA)

you directly contribute $4300 to your HSA, which you enter in Turbotax 

the total contributions to the two accounts is now $9700, which exceeds the family maximum of $8550 by $1150.

you indicate to Turbotax in your HSA worksheet that you are withdrawing the $1150 excess FROM YOUR ACCOUNT before 4/15/2026. as such, your HSA deduction is reduced from 4300 to $3150. You are not taxed on the $1150 because you have not gotten a deduction for it. so the both of you have had HSA contributions for 2025 of $5400 +3150 =8550 of which you actually paid $7450. (for some reason congress made the family contribution $50 less than two self-only contributions

if you withdraw the excess from your spouse's account it will be taxed (but then you withdraw nothing from your account so you get a deduction of $4300

box 1 of spouse's w-2 is reduced by $4300 her contributions 

then there is the $1150 that is taxable 

and your deduction of $4300 for direct contributions

the net is  $7450. the same as anove