topic My pleasure in Retirement tax questions

Home improvement and 401k early withdraw

wadevon — Sat, 01 Jun 2019 15:21:40 GMT

We withdrew money from 401k for medical expenses and to cover the cost of garage demo and new front steps as ordered by our home owners insurance company. Can the money we used for the garage and steps be a credit towards the taxable amount of the 401k withdraw?

There are certain exceptions to the penalty for an early...

MichaelL1 — Sat, 01 Jun 2019 15:21:41 GMT

There are certain exceptions to the penalty for an early withdrawal from a 401K.

Based on the wording of the question, only the medical expenses that exceed 7 1/2% of your adjusted gross income would qualify.

Allowable exceptions to the 10% early (before age 59-1/2)
withdrawal penalty are:

1. Rollovers to another IRA (no tax due)
2. Disability
3. Medical costs exceeding 7-1/2% of AGI
4. Separation from service at age 55 or older (pensions & 401K but not IRAs)
5. Substantially equal periodic payments(SEPP)
6. Military reservist called to active duty
7. Public safety employees separated after age 50
8. IRS levy
9. Education expenses (Only IRAs; not available for withdrawals from 401k plans)
10. Court ordered spousal payments
11. First time home buyer (Only IRAs; not available for withdrawals from 401k plans)
12. Beneficiary
13. Unemployed Medical Insurance
14. Age 59-1/2

When you enter the 1099R and keep continuing, there will be a number of questions and you will get to the exceptions from the 10% penalty area.

The 1099R will be reported as follows:

To enter pension and annuity Payments (1099-R)

Click on Federal Taxes
Click on Wages and Income
Click on I'll choose what I work on (if shown)
Scroll down to Retirement Plans and Social Security
On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button

We paid insurance premiums out of pocket, but were never...

wadevon — Sat, 01 Jun 2019 15:21:41 GMT

We paid insurance premiums out of pocket, but were never unemployed. So we cannot include (see 13 above)?

That is correct. #3 is only chance to avoid to the penal...

MichaelL1 — Sat, 01 Jun 2019 15:21:43 GMT

That is correct. #3 is only chance to avoid to the penalty based on what you have told me

Thank you.

wadevon — Sat, 01 Jun 2019 15:21:44 GMT

Thank you.

My pleasure

MichaelL1 — Sat, 01 Jun 2019 15:21:47 GMT

My pleasure