What counts as permanent disability expenses?

[dream-w-bean]

I took my 401k out early and one of the reasons for being exempt from the extra tax is permanent disability, what counts as permanent disability expenses, do disability aids count?

[MaryK4]

Yes, disability aids would qualify.  A person is permanently and totally disabled if they can't engage in any substantial gainful activity because of a physical or mental condition AND a qualified physician determines that the condition has lasted or can be expected to last continuously for at least a year or can be expected to result in death.

[dream-w-bean]

My doctor, psychiatrist, and therapists (both mental and physical) agree that my disability is permanent, for mental and physical. But I haven't been approved for disability income from social services yet, can I still count my expenses? 

Also, what forms would I need to input as proof of my expenses? 

[LindaS5247]

To qualify for penalty-free early withdrawals from a traditional IRA or 401(k), your disability must be “total and permanent,” as defined by the IRS — meaning that your physical or mental condition leaves you unable to do any substantial work and will be fatal or, in the tax agency’s terms, “of a long, continued and indefinite duration.”

Your doctor must certify that your disability prevents you from working and that your condition is expected to last more than a year or result in your death. Note: A Physician's statement obtained in an earlier year. If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2022, you may not need to get another physician's statement for 2022. 

To claim a disability exemption to the early-withdrawal penalty, complete IRS Form 5329 and file it with your federal taxes.

To enter a Form 5329 in TurboTax:

1. Open your return and 
2. click on Search on the top of your screen
3. In the Search box, type form 5329 and click on the magnifying glass icon on the right
4. Click on the link Jump to form 5329 
5. TurboTax will take you to a section where you can fill out form 5329, which will be included in your tax return

You can also contact a live agent to help you with this as they can share your screen.  For direction on how to do this click here for information on Turbo Tax Support.

TurboTax generates the Form 5329 if it discovers that you owe extra tax on a variety of situations, such as early distributions from a retirement plan. After entering your Form 1099-R follow the prompts carefully and answer all of the questions.

Click here for more information on Form 5329.

Please refer to Publication 502 below for a complete list of medical expenses allowed. You can't include in medical expenses the cost of household help, even if such help is recommended by a doctor. This is a personal expense that isn't deductible. However, you may be able to include certain expenses paid to a person providing nursing-type services. 
 

Click here for Publication 502 which details what Medical and Dental Expenses may be eligible.

Click here for Publication 524 which discusses in detail the Credits for the Disabled and the Requirements to meet the eligibility for such.

Click here for tips for legally disabled persons.