Health insurance premiums on Schedule A and Form 5329

[joeyman668]

IRS allows the portion of early withdrawals from a Simple IRA that are used for medical expenses to be exempted from the 10 percent additional tax payment requirement.  Eligible medical expenses include payment of health insurance premiums.  But the IRS also says payment of health insurance premiums while unemployed can also be exempt from the additional 10 percent tax.  I have been unemployed for six years, and have taken early withdrawals from my IRA for the past three years.  On Schedule A, you can only claim the medical expenses that exceed 10 percent of adjusted gross income.  I would get a bigger deduction by excluding only the amount I paid for health insurance premiums on Form 5329.  I'm thoroughly confused because the IRS and TurboTax have both eligible medical expenses and payment of health insurance premiums while unemployed as exceptions to the additional 10 percent tax.  So which exception should I claim?

[AmyT]

You are able to use the medical expense exception on your Form 5329 and claim the expenses paid on Schedule A.

You will want to treat the withdrawals that were used for medical expenses as an exception to the 10% penalty on Form 5329, as these amounts do qualify.

Additionally, you can claim all of the medical expenses paid using these (or other) funds.  You are correct that they will not be deductible until the amount exceeds 10% of your adjusted gross income (AGI) (this amount is reduced to 7.5% if you were born before January 21, 1952).  You will need to enter all the medical expenses paid to get the proper amount of the deduction - TurboTax will calculate the amount that can be deducted.

Using the exception to the penalty does not mean that you cannot claim the deduction for the expenses paid as an itemized deduction.

[joeyman668]

But why does the IRS have list both the amount paid for medical expenses AND the amount paid for health insurance premiums while unemployed as exceptions that can be claimed on Forum 5329 to avoid the 10 percent additional tax penalty?  This is why I'm still confused and can't figure out which exception to claim.

I understand that I can claim the medical expenses both on Schedule A and Form 5329.  But the IRS says that more than one exception can be claimed on Forum 5329.  If, however, I were to claim Exception 5 (medical expenses) and Exception 7 (health insurance premiums for the unemployed), it seems like that would be double-counting the  amount I paid for health premium payments because they would be included in both the total medical expenses on Schedule A (minus 10% of my AGI) and then again under Exception 7 on Form 5329.  That's why I can't figure out what amount to claim on Line 2 of Form 5329.