New Tax Bill & Penalty-Free IRA Distribution
My understanding is as follows:
A distribution may be penalty-free on certain unreimbursed medical expenses that exceed 10% of income if you’re under age 65 (7.5% of your income if you’re 65 or older). The distribution must be made in the year that the expenses are paid.
But…
the new tax bill says that for 2017 and 2018, the threshold for deducting medical expenses reverts to 7.5% of AGI. Can you please tell me if this will apply to an IRA distribution (as described in the scenario above)?
Thank you very much.
Steve
Permalink Submitted by David Mertz on Thu, 2017-12-28 18:29
Yes, this will apply to IRA distributions. Section 72(t)(2)(B) which provides the penalty exception for medical expenses refers to the deduction in Section 213 which is the section modified by the new tax law.