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Tax Law (Questions About Taxes)/Using IRA to pay for medical expenses and premiums

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Question
I am 56 years old, unemployed and pay for my monthly medical insurance premiums out of my own pocket in addition to my other medical expenses.  I need to use funds from my IRA to help pay off these costs.  

I know I would owe taxes on the amount I take our but can I avoid the 10% penalty if I use the IRA funds to pay off these expenses?  

Should my monthly medical insurance premiums be included with my other medical expenses subject to costs exceeding 7.5% of my AGI or are they accounted for separately in which case I can pay off the entire amount?

How would I account for this on form 5329?

Thank you for your help.

Answer
Thanks for your question.

You can withdraw from your IRA to pay for any medical expense that would be deductible on Schedule A.  However, only the amount withdrawn that exceeds 7.5% of your adjusted gross income can be excepted from the penalty.

On line 2, use code 5 on Form 5329.

Distributions from an IRA to an unemployed individual to pay for health insurance after leaving a job if you have received unemployment compensation for 12 consecutive weeks.  Use code 7.  If taking this route, do not include the health insurance in the code 5 amount.

Hope this helps.

John Stancil, CPA  

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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