No. A health crisis does not count as a casualty. A casualty loss occurs generally due to theft or a disaster. To claim a loss from a disaster, it must be in a federally declared disaster zone.
However, depending on what your health crises was and how much you spent on medical care, you may be able to exclude some of your 401K from the penalty.
- If you became permanently and totally disabled, then this would qualify as an exception to the penalty.
- If you spent more than 7.5% of your AGI for the year, then the amount that was over 7.5% of your AGI would be able to be excluded from the penalty
- If you were diagnosed as having a terminal illness, then this would qualify as an exception to the penalty for your 401K
- If you were unemployed for 12 weeks or more and received Unemployment, then the amount used for your health insurance would be exempt from the IRA penalty.
As your walk through
Retirement topics: Exceptions to tax on early distributions
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