IRA Withdrawal for In Vitro

[elenalevario]

Hi all - 

I took out some money from my IRA (premature distribution) and used the funds to pay for In Vitro related expenses.  Need some help/guidance.  

1. On IRA 1099R Income section, can I list this as used for "MEDICAL"?  If I do that, then the withdrawal isn't taxable.  
2. If the answer to #1 is YES, then do I also list the expenses in the medical expense section of Deductions? Would this be ok?

[AnnetteB6]

When you enter the information from your Form 1099-R and come to the screen asking if the funds were used for medical expenses, the amount that was used to pay for medical expenses over and above 7.5% of your Adjusted Gross Income will be exempt from the 10% early distribution penalty.  The distribution will still be subject to income tax.  The medical exception is for the penalty only.  

If you do qualify to be exempt from the penalty, then you can also deduct the medical expenses as part of your itemized deductions.  This is because the money used to pay the medical expense is being taxed, therefore the expense can be deducted.

@elenalevario

[Opus 17]

The above answer is incomplete. Unfortunately, under current tax court rulings, expenses for in vitro fertilization are not tax deductible medical expenses if performed so that same sex couples can have children.  It may not be fair, but it is the current law, and Congress will have to change it. If the in vitro expenses were for a heterosexual couple that is unable to conceive normally, then the expenses are tax deductible and also eligible for the IRA withdrawal provision.

remember that all withdrawals from a traditional IRA are always subject to normal income tax. And, in the case of medical expenses, only the part of the expense that is more than 7.5% of your gross income is eligible for the exemption to the 10% early withdrawal penalty.  For example, if your gross income was $80,000, 7.5% of your gross income is $6000.  You could only claim the exemption to the IRA withdrawal penalty for the part of your medical expenses that were more than $6000.

[har34476]

Thanks to all for the above answers. 

To add to the complexity: my wife and I are considering doing IVF in Colombia (the country, not DC), where she is from.  If the payment is to a fertility clinic there, will I still be able to avoid the 10% penalty?  Of course, I assume the rule stated above  about >7.5% of incom.

Thanks,

Nick

[Opus 17]

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@har34476 wrote:

Thanks to all for the above answers. 

To add to the complexity: my wife and I are considering doing IVF in Colombia (the country, not DC), where she is from.  If the payment is to a fertility clinic there, will I still be able to avoid the 10% penalty?  Of course, I assume the rule stated above  about >7.5% of incom.

Thanks,

Nick

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Medical expenses paid for services outside the US are allowable if the expense would have been allowable inside the US.

For example, certain drugs may be available in other countries that are not legal in the US.  Those drugs would not be allowable medical expenses even though they are legal in the country where you purchased them.

I don't see any reason that would disqualify IVF done in another country since that is legal in the US.  The 7.5% rule still applies, of course. 

[Opus 17]

@har34476 

In addition, as I forgot to include before:

You can include the cost of transportation in order to receive care, and you can include up to $50 per night per person for the cost of lodging, as long as the primary reason for the travel is to receive medical care from a doctor or qualified medical professional to treat or cure a medically eligible condition. This would include travel to receive fertility treatments.  (“Per person” means the person or persons receiving medical care plus one travel companion for the person receiving medical care.)

You can’t deduct the cost of travel and lodging if it is mainly for a vacation or other personal purpose, and the medical care is an incidental aspect of the travel, and you can’t deduct travel costs that are intended for a general improvement in your health. 

[har34476]

Hello Opus,

Much appreciated!  This info is valuable to me.

Nick