IRA Rollover

Archive for September, 2009

Question: Regular IRA early withdrawal??

my annual income for 2007 is $60,000. I’m still employed but I buy my own health insurance and my employer doesn’t re-emuburse it.
I paid 12X$300 =$3,600 so far and I have incured a medical bill for about $3,000; Total $6,600, greater than 7.5% of AGI

1.I have a rollover IRA which is hard to manage ($4000) and I would like to withdraw it bcz of above situation.Can I avoid 10% extra tax..
2.Do I have to take the distribution by the end of year, incase I can claim the above health care expense?

How much can I withdraw without penalty?

friend of mine says I need to be UNEMPLOYED TO CALIM HEALTH INSURANCE PREMIUM?
Can I claim any of the above health care expense during my next Tax filing. Every year I use only standard deduction..

Any help is greatly appreciated..
Can I also claim supplemental insurance premiums like Dental & Accidental policies??

Answer: You can avoid the 10% penalty on your IRA distribution on money you take out which is in excess of 7.5% of the medical expenses you paid which would be deductible on Schedule A. You do not have to actually itemize to take advantage of this provision.

For example, if you paid $6,600 in medical expenses, and your adjusted gross income is $60,000, then you have $2,100 of deductible medical expenses. You could withdraw $2,100 of your traditional IRA in the same year you paid the medical expenses, and you would not pay the 10% penalty on that amount of your withdrawal.

If you were unemployed, receiving unemployment benefits, and using COBRA insurance, then the entire COBRA premium could be paid for with your IRA money without incurring the 10% penalty. This is what your friend might be trying to tell you. However, this does not apply to you.

You can include your supplemental dental insurance premium you paid in your medical expenses. Your accidental death/dismemberment policy premium would not be deductible.

The amount of your IRA distribution which is not subject to penalty is figured on Form 8606 which is attached to your tax return.

401K to IRA Rollover – Case Study