Regular IRA early withdrawal?? -

my annual income for 2007 is $60,000. I'm still employed but I buy my own health insurance and my employer doesn't re-emuburse it. I paid 12X$300 =$3,600 so far and I have incured a medical bill for about $3,000; Total $6,600, greater than 7.5% of AGI 1.I have a rollover IRA which is hard to manage ($4000) and I would like to withdraw it bcz of above situation.Can I avoid 10% extra tax.. 2.Do I have to take the distribution by the end of year, incase I can claim the above health care expense? How much can I withdraw without penalty? friend of mine says I need to be UNEMPLOYED TO CALIM HEALTH INSURANCE PREMIUM? Can I claim any of the above health care expense during my next Tax filing. Every year I use only standard deduction.. Any help is greatly appreciated.. The only way you can withdraw qualified money prior to 59 1/2 without paying the penalty is by using "72t" or "72q". Go to www.irs.gov, or better yet talk to an accountant. Your health insurance premium is deductible as a medical expense, whether you are self employed or not, but only if you itemize. Your 2007 standard deduction is $5,350 so you will have enough expenses to itemize. Unfortunatley, your tax savings will be minimal. Your only benefit will be the tax on the difference of $5,350 and your total deductions, in this case about $6,600 - $5,350 = $1,250 X .15 = $187.50. I have assumed you are in the 15% marginal tax bracket. You should be able to waive some of the penalty of the IRA distribution but only to portion of your medical expenses which exceeded the 7.5% threshhold. In your case, $60,000 X .75 = $4,500 (assuming no other income, but you would heave to add in the amount of the IRA distribution before calculating your 7.5%). Therefore, you should be able to waive the penalty on ALL your $4,000 withdrawal. Your distribution MUST BE MADE IN THE YEAR THE MEDICAL EXPENSES WERE PAID. One bit of advice - look into an HSA for 2008. This is a health savings account which is deductiblelike an IRA but you need to have a high deductible health insurance policy for this to work. You would need a minimum $1,100 deductible policy for a single person with a maximum out of pocket limit of $5,500. There are other requirements and restrictions but you should be able to meet them. You could then contribute up to $2,850 per year into an HSA, take a deduction and then make a withdrawal to pay your insurance premiums. Anything left in the HSA continues to grow, free of taxes. There are no penalties for withdrawals as long as your withdrawals do not exceed your unreibursed medical expenses. These are just the basics - you will need to explore the full details. Just so you know - I am a tax professional. I have also made some assumptions in providing this response. If you have other questions or need clariifications, you are free to e-mail me directly and I will get back to you as soon as I can. Glad to help. hfr1200@yahoo.com. Last I checked (and it's been a couple years), any insurance PREMIUMS can't be included in medical expenses, unless you're self employed (which you clearly aren't). 1. You're not going to avoid that penalty and tax. 2. I don't think you can withdraw ANY without penalty, under these circumstances. Advice: don't take legal and tax advice from friends and family, unless they're professionals and know what the heck they're talking about. You'll get burned.