IRA Distributions Med Not Subject to Penalty

[Randall]

Do we deduct 7.5% of AGI from the amount of IRA distributions used for medical expenses?  Or do other medical expenses such as health ins premiums offset some or all of the 7.5%.    In other words if client took out $12,000 from IRA, used $4000 for medical expense and AGI is $3500, does only $500 escape the 10% penalty?  If client paid $2000 health ins premiums, does that count as part of the 7.5% and say $4000 minus $1500 or $2500 escape the 10% penalty?

 

[TexTaxToo]

They don't actually have to use the distribution for medical expenses.  There is not even a requirement that they take the distribution before paying the expenses. They simply have to have expenses that qualify for the medical deduction in excess of 7.5% of AGI (whether or not they itemize).  So you can count all qualifying expenses, deduct 7.5% of AGI, and claim the remainder on Form 5329.