Can the $27000 we withdrew from our 401k for medical hardship be claimed on the medical exemption?

[SweetieJean]

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[DexterS · Accepted solution]

There are a number of exceptions that offer some relief from the 10% Early Withdrawal Penalty.

Here is a list of all the Exception Codes:

#.  – Exception Description

01      Qualified retirement plan distributions (does not apply to IRAs) you receive after separation from

          service when the separation from service occurs in or after the year you reach age 55

          (age 50 for qualified public safety employees).

02    Distributions made as part of a series of substantially equal periodic payments (made at least

         annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and

         your designated beneficiary (if from an employer plan, payments must begin after separation

        from service).

03   Distributions due to total and permanent disability.

           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 medical determination

           that your condition can be expected to result in death or to be of long, continued, and indefinite

           duration must be made.

04   Distributions due to death (does not apply to modified endowment contracts).

05   Qualified retirement plan distributions up to the amount you paid for unreimbursed medical

        expenses during the year minus 10% (or 7.5% if you or your spouse were born before

        January 2, 1952) of your adjusted gross income (AGI) for the year.

06   Qualified retirement plan distributions made to an alternate payee under a qualified domestic

       relations order (does not apply to IRAs).

07   IRA distributions made to certain unemployed individuals for health insurance premiums.

08   IRA distributions made for qualified higher education expenses.

09   IRA distributions made for the purchase of a first home, up to $10,000.

10   Qualified retirement plan distributions made due to an IRS levy.

11   Qualified distributions to reservists while serving on active duty for at least 180 days.

12   Other (see Other next). Also, enter this code if more than one exception applies

I believe #5 may offer you some relief.  #7 would not help you since that's just IRAs, nor 401(k)s.

See the following link to Form 5329 for more details:

Instructions for Form 5329