IRA Hardship Withdrawls (Health Costs)
When I use IRA withdrawals to pay for medical bills, is the penalty AND the income tax forgiven, or just one of the two?
Are there any specific rules I need to follow in order to avoid problems?
Can you provide me with any articles you have on the subject?
Permalink Submitted by Alan - IRA critic on Thu, 2014-11-06 01:10
The ordinary income tax will still be due for distributions, but if you are under 59.5, there are two medically related penalty exceptions that you might qualify to use. The first is related to loss of job and collecting UC for at least 12 consecutive weeks. Under that exception what you pay for health insurance for your family from IRA distributions is penalty free. Always determine if you qualify for that exception first before going on to the second broader exception. If you do NOT qualify for the former, the other exception covers your medical bills including post tax insurance premiums but only to the extent that these expenses exceed 10% of your AGI. The 10% may be too high a hurdle to reach. These exceptions are described in more detail on p 57 of Pub 590. There are some timing consideration to meet, so read p 57 carefully if you think you qualify. http://www.irs.gov/pub/irs-pdf/p590.pdf