For 2021, is the medical exception on early retirement distributions in excess of 7.5% or 10% of AGI? Turbotax says 7.5% but the IRS website says 10% for 2021.

The "These Situations May Lower Your Tax Bill" screen appears after entering all retirement distributions. It shows a list and fields to enter the amounts. "Medical Expenses (in excess of 7.5% of AGI)" is one of them.

1212

Level 15

Jul 21, 2022 4:55:35 AM

Best place to get the answer is on the form itself ...

Level 15

Jul 21, 2022 5:00:00 AM

7.5% of AGI. It's defined in section 72(t)(2)(B) of the tax code to be the same as the amount of uncompensated medical expenses deductible on Schedule A determined without regard to whether or not one itemizes deductions. The percentage shown on Schedule A line 3.

Level 1

Jul 21, 2022 4:41:43 PM

Thank you. Can't argue with the form and the law itself. I wonder why they have this wrong on their website. They call out 2021 specifically vs the previous years. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

Level 15

Jul 22, 2022 5:37:21 AM

See page 25 of 2021 IRS Pub 590-B for the correct information: https://www.irs.gov/pub/irs-prior/p590b--2021.pdf

That IRS web page is simply wrong because it has not been updated to reflect the law change provided in the Taxpayer Certainty and Disaster Tax Relief Act of 2020 which made 7.5% permanent. It was previously scheduled to revert to 10% in 2021.

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For 2021, is the medical exception on early retirement distributions in excess of 7.5% or 10% of AGI? Turbotax says 7.5% but the IRS website says 10% for 2021.