What medical expenses qualify for a hardship withdrawal?
Asked by: Justus Brakus | Last update: December 28, 2025Score: 4.8/5 (59 votes)
What qualifies as a medical hardship withdrawal?
For example, some 401(k) plans may allow a hardship distribution to pay for your, your spouse's, your dependents' or your primary plan beneficiary's: medical expenses, funeral expenses, or. tuition and related educational expenses.
What is an example of a medical hardship?
Medical Hardship Withdrawal
Examples: Severe injury or illness with prolonged recovery and/or ongoing close medical monitoring. Severe complications of a chronic medical condition. New diagnosis of a life threatening condition.
What proof do you need for a hardship withdrawal?
What Proof Do You Need for a Hardship Withdrawal? You must provide adequate documentation as proof of your hardship withdrawal. 2 Depending on the circumstance, this can include invoices from a funeral home or university, insurance or hospital bills, bank statements, and escrow payments.
Are dental expenses eligible for hardship withdrawal?
Examples of qualifying medical expenses include surgery, hospitalization, medical treatments, prescription medications and emergency dental procedures. To qualify for a penalty-free withdrawal, the unreimbursed medical expenses must exceed 7.5% of your adjusted gross income (AGI).
401k Hardship Withdrawals [What You Need To Know]
What are the approved hardship withdrawals?
A hardship distribution is a withdrawal from a participant's elective deferral account made because of an immediate and heavy financial need, and limited to the amount necessary to satisfy that financial need. The money is taxed to the participant and is not paid back to the borrower's account.
What amount can you deduct for eligible medical and dental expenses?
You can deduct on Schedule A (Form 1040) only the part of your medical and dental expenses that is more than 7.5% of your adjusted gross income (AGI).
Why would a hardship withdrawal be denied?
Hardship distribution for a reason not allowed by the plan
For example, if the plan states hardship distributions can only be made to pay tuition, then the plan can't permit a hardship distribution for any other reason, such as a home purchase.
Will I get audited for a hardship withdrawal?
You may need to supply supporting documentation of your hardship, including legal documents, invoices, and bills. Although the IRS does not approve hardship withdrawals from 401(k)s, you may still be audited.
How do you get approved for hardship?
To be eligible for a hardship withdrawal, you must have an immediate and heavy financial need that cannot be fulfilled by any other reasonably available assets. This includes other liquid investments, savings, and other distributions you are eligible to take from your 401(k) plan.
Can I take a hardship withdrawal without documentation?
You do not have to prove hardship to take a withdrawal from your 401(k). That is, you are not required to provide your employer with documentation attesting to your hardship. You will want to keep documentation or bills proving the hardship, however.
What are the five common categories of hardship?
The Hardship Factors
It then sets forth the five most common factors and their impact: family ties, social and cultural issues, economic issues, health conditions and care, and country conditions. It then spells out examples of what hardships might fall within each of the five categories.
How to write a hardship letter for medical bills?
To Whom It May Concern: I am writing to negotiate the above medical bills because I am unable to pay the amount requested. Pursuing me for these bills will force me (and my family) into further financial hardship. This is where you explain your current financial situation and why you are unable to pay.
What is proof of hardship documentation?
Acceptable Documentation
Lost Employment. • Unemployment Compensation Statement. (Note: this satisfies the proof of income requirement as well.) • Termination/Furlough letter from Employer. • Pay stub from previous employer with.
How do you justify a hardship withdrawal?
- Certain medical expenses.
- Burial or funeral costs.
- Costs related to purchasing a principal residence.
- College tuition and education fees for the next 12 months.
- Expenses required to avoid a foreclosure or eviction.
- Home repair after a natural disaster.
Does the IRS ask for proof of hardship?
To prove your tax hardship to the IRS, you will need to submit information about your financial situation to the federal government in a hardship request. This is done using Form 433A/433F (for individuals or self-employed) or Form 433B (for qualifying corporations or partnerships).
What amount of money triggers an IRS audit?
Not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.
Does my employer know if I take a hardship withdrawal?
On an institutional level, your employer has access to these records. This means that every withdrawal from an employee 401(k), including loans and hardship withdrawals, can be known by certain company employees.
What qualifies as medical hardship withdrawal from 401k?
However, you may be eligible for an early distribution or a hardship withdrawal if you face an “immediate and heavy financial need,” such as: Medical expenses. Principal residence purchase. Foreclosure or eviction prevention.
How to qualify for hardship relief?
Income and necessary living expenses: The IRS compares your income against allowable living expenses, which include housing, utilities, food, clothing, transportation and healthcare. If your income barely covers or falls short of these basic expenses, you may qualify for hardship status.
Can you go to jail for lying about a hardship withdrawal?
The consequences of false hardship withdrawal can range from fines and penalties to tax implications or even jail time.
What cannot be claimed as a medical expense?
Examples of Medical and Dental Payments you CANNOT deduct:
Health club dues, gym membership fees, or spa dues. Electrolysis or hair removal. The cost of diet food or nutritional supplements (vitamins, herbal supplements, "natural medicines") Teeth whitening.
What proof do I need to deduct medical expenses?
- What medical care was received.
- Who received the care.
- The nature and purpose of any medical expenses.
- The amount of the other medical expenses.
What does the IRS consider qualified medical expenses?
Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners.