DexterS
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Retirement tax questions

Yes, your distribution from a 401-K can be exempt from the 10% penalty due to disability. 

IRS 590b says:

Disabled.

If you become disabled before you reach age 59 1/2, any distributions from your traditional IRA because of your disability are not subject to the 10% additional tax.

You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because
of your physical or mental condition. A physician must determine that your condition can be expected to result in
death or to be of long, continued, and indefinite duration.

Unfortunately, this only applies to the penalty, you will still be subject to tax on the distribution to the extent it has not previously been taxed.

 

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