See PUB 501 which explains the conditions that allow one to use HOH filing status. Gross income is one of the conditions that can disqualify one from HOH status.
My question restated: Can the qualifying person (older sister who lost her job and is living with me where I pay all the expenses) still qualify me for HOH because she has a 401 K, NOT USED (too young) because she would be penalized to take out the money now? This category of withdrawal of a 401 K early is not stated clearly in any regs I can find. The IRS rule states "distributions and earnings are includable in taxable income at retirement"...I know that. But she hasn't taken a distribution. My question is: is the 401 K money considered as taxable income for determining HOH filing status if she has not taken any money out yet? Thanks Sandra
