Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
New Member
posted Feb 24, 2025 7:11:24 PM

Will I qualify for eligible emergency expenses deductions after I closed out a 401K from a former employer when I was injured and lost my current job?

I have already paid the add'l penalty for the early withdrawal. Because I was injured and lost my job, I needed the 401K money for expenses as I was unable to work. Can this qualify for the emergency expenses deduction of $1000?

0 3 2959
1 Best answer
Expert Alumni
Feb 24, 2025 7:31:36 PM

Yes, for the $1,000 emergency exception, there is no qualification that you must remain employed at the job where you originally contributed to the 401(k). 

3 Replies
Expert Alumni
Feb 24, 2025 7:12:35 PM

Yes. The IRS defines “emergency personal expense" as an unforeseeable or immediate financial need relating to necessary personal or family emergency expenses. (Section 115 of the Secure 2.0 Act)

 

An emergency will allow you to make a withdrawal, still subject to tax, but without the 10% early withdrawal penalty. ‌You can take one financial withdrawal emergency per year, not to exceed $1,000.

New Member
Feb 24, 2025 7:19:36 PM

Even if I'm no longer employer by that company? I left in 2023. I took the entire 401K amount in one final distribution. Thanx in advance for the help...

Expert Alumni
Feb 24, 2025 7:31:36 PM

Yes, for the $1,000 emergency exception, there is no qualification that you must remain employed at the job where you originally contributed to the 401(k).