@cc1790 wrote:
But if we pay the full amount back, why should we get taxed on the distribution?
Because the distribution is taxable income reported on your tax return. Why would you think it would not be taxable income?
IRS Form 8915-E instructions - https://www.irs.gov/pub/irs-pdf/i8915e.pdf
How Is a Qualified 2020 Disaster Distribution Taxed?
Generally, a qualified 2020 disaster distribution is included in your income in equal amounts over 3 years. However, if you elect, you can include the entire distribution in your income in the year of the distribution.
