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.)