How to Withdraw From an IRA for Elective Surgery
Elective surgery may allow you to avoid the early withdrawal penalty applied to IRA distributions before age 59 1/2, depending on the nature of the surgery and the cost. The Internal Revenue Service only allows a waiver of the penalty for qualifying medical expenses in excess of 7.5 percent of your adjusted gross income. Medical expenses can include legal surgeries that are not for cosmetic purposes. For example, you could include the cost of eye surgery to improve your vision but not breast implants. Even if your surgery does not qualify as a medical expense, you can still take money out of your IRA.
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Instructions
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Complete the IRA distribution request form provided by your financial institution. This form will tell your financial institution how much you want to withdraw and from which account. At the end of the year, your financial institution mails you a Form 1099-R reporting the distribution.
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Complete Form 5329 to either report your medical expenses exemption, calculate your 10 percent early withdrawal penalty or both. For example, if you have a $10,000 surgery and your adjusted gross income equals $100,000, you avoid the early withdrawal penalty on $2,500 (the amount over 7.5 percent of your adjusted gross income), but must pay the early withdrawal penalty on the first $7,500 for a penalty of $750. The code for a medical waiver is "05."
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Enter the penalty amount on line 58 of Form 1040. It adds to your tax liability for the year.
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Enter the amount of your IRA distribution on line 15b of Form 1040. This amount adds to your taxable income. The IRS still taxes the distribution even if you avoid the early withdrawal penalty.
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Report the amount, if any, of federal income tax withholding on line 61 of your Form 1040 tax return. Your financial institution may have withheld money for your federal income taxes. If so, it will be reported in box 4 of your Form 1099-R.
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