Taxable Excess HSA Contributions

[mfrtn]

In 2025, my wife and I were on High Deductible Family plan from my employer between Jan and March.  In March, I retired and switched to my wife's High Deductible Family Plan from her employer which we were on for the remainder of 2025.  We both made HSA contributions through our respective employers, me from Jan through March and her from May through October.  

In January of this year, my wife applied for SSA benefits which enrolled her in Medicare Part A with an effective date of July 2025.  We are still on her High Deductible Family Plan from her employer as she is still working.  We realize that we have HSA contributions to remove from July to October and I have calculated the amount of excess contributions to withdraw.  I would expect these excess contributions to be taxable but TurboTax is not recognizing the tax on the contribution, just the earnings.  How do I need to enter the monthly calendar entries related to health care coverage and get TurboTax to recognize the taxable income.

[BillM223]

"but TurboTax is not recognizing the tax on the contribution, just the earnings. "

Have you received and entered a 1099-SA? And was the distribution code in box 3, a '2'? This is the "withdrawal of excess HSA contributions". On this 1099-SA, box 2 contains the earnings that the excess earned while the excess was in the HSA, and yes, this amount is taxable.

But on this type of 1099-SA, the contribution in box 1 is NOT added to income. This is for one of two reasons. If the excess contributions were "employer" contributions (i.e., with a code W in box 12 of your W-2), then as soon as the excess was detected, then TurboTax would have automatically added the excess back to Other Income in Schedule 1 (1040), line 8f. If this is your situation, go look.

But if the excess contributions were "personal" contributions (i.e., made by you directly to the HSA custodian NOT though through your employer), then this amount, which would have been deducted on Schedule 1 (1040), Line 13,  will be reduced by the amount of the excess.

Which situation is yours? 

[mfrtn]

Distribution code from 1099-SA in Box 3 is 2.  W-2 had code W in Box 12 but excess was not added back to Other income in Schedule 1040, line 8f.  That appears to be the problem and I do not know how to resolve.  Also, does TurboTax determine the excess contributions or use the amount from 1099-SA.

[RobertB4444]

TurboTax should use the amount from the 1099-SA as the returned amount.  The system should also tell you the excess if it was contributed this year.  If the excess was made through a payroll contribution it may have been added back on line one of your 1040 as income that was allowed to be deducted on your W2.  Check to see if it is included in the line one amount and has just been added back as wages.