Early wirhdrawal penalty re medical expenses
Taxpayer took an early wirhdrawal of his IRA funds for living expenses. A portoion of the funds were used for medical expenses as well as the ordinary living expenses. Taxpayer incurred significant medical expenses during the year that exceeded the 7.5% limitation.
Question: Can the portion of medical expenses that were dedcuted on the tax return be carved out of the penalty amount even though a portion of the total distribution was used for other than medical.
Thank you for your consideration in this matter.
Jon
Permalink Submitted by mk foss on Thu, 2010-05-06 20:05
The early withdrawal penalty is reduced by the amount expended for the various exceptions. It’s not unusual that part of the distribution will not incur the 10% penalty because it was used for medical expenses in excess of the 7.5% limitation. If there are also higher education expenses etc the same year, the amount subject to the 10% penalty could be further reduced.