The tsp site states that if you make an early withdrawal in a year that your medical deductions are over 7.5% of your income there is no 10% penalty. For example if your income was 22,000 and you withdrew 20,000,total income 42,000x7.5%=3150.If your medical was 5150 would there be no penalty at all?
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tsp early withdrawal
- Thread starter pete7713
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- 2,450
Sounds like it may be accurate. Here's some sources...
IRA Early Withdrawal Exceptions
Earlier we mentioned that there were exceptions to the age 59 1/2 rule. In reality everyone that owns an IRA can take a withdrawal before the age 59 1/2 and not have to pay the 10% tax penalty. That's right; everyone qualifies for penalty-free IRA withdrawals provided they take the money out in a certain fashion or for a certain reason. Let's take a closer look at how that can happen.
There are a total of eight exceptions to the age 59 1/2 rule that are outlined by the IRS:
Ask the Experts: Is My IRA Withdrawal for Medical Expenses Penalty-Free?
Q. I took money out of my IRA to pay medical bills and other expenses. I’m 57. Will I have to pay a penalty and taxes for the early withdrawal?
A. You will have to pay taxes on the amount you withdrew. But you can avoid the 10 percent penalty for early withdrawals, which applies to people younger than 59 1/2, if the funds that you used to pay unreimbursed medical expenses exceeded 7.5 percent of the adjusted gross income (AGI) reported on your tax return.
For example, if your income was $30,000, only the first $2,250—7.5 percent of your AGI—of the IRA withdrawal that you used for medical expenses is subject to the penalty.
Source: http://bulletin.aarp.org/yourmoney/...rawal_for_medical_expenses_penalty_free_.html
IRA Early Withdrawal Exceptions
Earlier we mentioned that there were exceptions to the age 59 1/2 rule. In reality everyone that owns an IRA can take a withdrawal before the age 59 1/2 and not have to pay the 10% tax penalty. That's right; everyone qualifies for penalty-free IRA withdrawals provided they take the money out in a certain fashion or for a certain reason. Let's take a closer look at how that can happen.
There are a total of eight exceptions to the age 59 1/2 rule that are outlined by the IRS:
- Unreimbursed Medical Expenses - If your medical expenses are more than 7.5% of your adjusted gross income for that year, then you are allowed to take an IRA withdrawal without paying the 10% tax penalty.
- Medical Insurance - If you lost your job, received unemployment compensation and paid for medical insurance for yourself, your wife and your dependents, then you might be able to withdraw from your IRA the amount you paid for the insurance provided you did not receive the distribution more than 60 days after finding a job.
- Disability - If a physician determines that you are unable to do any substantial gainful activity due to physical or mental conditions, then you can make withdrawals that are not subject to the 10% tax penalty.
- Beneficiary of an IRA - If you were to expire before reaching age 59 1/2, then your IRA can be distributed to your beneficiaries or estate free from the early withdrawal tax penalty.
- Higher Education Expenses - If you paid expenses for higher education during the year, part (or all) of any distribution may not be subject to the 10% tax penalty.
- First Time Homeowner - You can make an early withdrawal from an IRA if you use the money to purchase, rebuild or build your first home. The distributions are limited to $10,000 and must be withdrawn no more than 120 days after making the purchase.
- Rollover into another Qualified Plan - If the withdrawal is rolled over into another qualifying IRA plan in a timely manner, then it is not subject to the 10% early withdrawal penalty.
Ask the Experts: Is My IRA Withdrawal for Medical Expenses Penalty-Free?
Q. I took money out of my IRA to pay medical bills and other expenses. I’m 57. Will I have to pay a penalty and taxes for the early withdrawal?
A. You will have to pay taxes on the amount you withdrew. But you can avoid the 10 percent penalty for early withdrawals, which applies to people younger than 59 1/2, if the funds that you used to pay unreimbursed medical expenses exceeded 7.5 percent of the adjusted gross income (AGI) reported on your tax return.
For example, if your income was $30,000, only the first $2,250—7.5 percent of your AGI—of the IRA withdrawal that you used for medical expenses is subject to the penalty.
Source: http://bulletin.aarp.org/yourmoney/...rawal_for_medical_expenses_penalty_free_.html
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