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What does the IRS consider as a “hardship”?

The following are considered “hardships” by the IRS:

  • Medical expenses described under Code §213(d) incurred or anticipated to be incurred by the employee, the employee’s spouse or dependent. This is for all deductible medical expenses — not just the amounts that actually exceed 7.5% of adjusted gross income.
  • Purchase (excluding mortgage payments) of a principal residence of the employee.
  • Tuition and related educational fees for the next 12 months for post-secondary education for the employee, spouse, children or dependents.
  • Payment to prevent eviction from the employee’s primary residence or foreclosure on the mortgage on the employee’s primary residence.
  • Funeral expenses of a parent, spouse, child or dependent.
  • Certain expenses related to the repair of damage to the participant’s principal residence that would qualify for a casualty deduction on the individual’s Federal Income Tax Return under Section 165 of the Internal Revenue Code. This would include expenses incurred to repair property damage that resulted from a natural disaster, flood damage or other loss. (The amount that may be included in the hardship withdrawal would be determined without regard to whether the loss exceeds 10% of adjusted gross income.)

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