Our gross distribution from the HSA Account was only $256. Do I really need to upgrade to deluxe?

[BMcCalpin]

The IRS requires you to file form 8889 (for the Health Savings Account) if you:

• made a contribution in 2016,
• took a distribution in 2016, or
• inherited the HSA during 2016

Since you had a distribution, the IRS requires you to file.

It's in your best interests to do so, because until you submit a complete form 8889 (which TurboTax will complete based on your answers in the HSA interview), the IRS assumes that all contributions to and distributions from your HSA are taxable, and they will send you a letter to that effect asking for taxes, penalties, and interest.

Because form 8889 requires form 1040, form 8889 is part of TurboTax Deluxe and higher versions.