Please go and look at Forms, Schedule 1 (Form 1040) on your desktop software. Is your $150 reported on Other Income, line 8 on Schedule 1 (Form 1040)? The description will be something like "Health Savings Account...".
If your $150 is not on line 8, then it is not being taxed.
However, there are two ways in which you might think that you are being taxed.
The first is that on the Wages & Income screen, the $150 will appear at the top as an apparent income item. It's not. It is printed here because it might be an income item, but it isn't once you tell TurboTax that it was all for qualified medical expenses. Line 8 is the real test.
Second, the IRS believes that, by default, that HSA distributions are taxable until you declare that they were all for qualified medical expenses. Thus as soon as you hit continue on the screens where you enter the 1099-SA, your refund is reduced (or your tax due increased) because it is temporarily considered taxable.
However, the next screen asks if this distribution was all for qualified medical expenses, and when you check "yes" and then hit Continue, then on the next screen the distribution is removed from Other Income and your refund should go back to normal.
Note that this second recalculation doesn't always take place immediately (depending on how busy your return is and how busy your computer is), and it's important that you not jump away from this screen too quickly, because that can freeze the distribution in Other Income. This is one reason why we recommend that taxpayers always go all the way to the end of the HSA interview before leaving for another section - to make sure that all the calculations that need to be done are in fact done.
[Edited 4/1/2020 3:56 pm CDT - updated for 2019]
