Bryan, who is 45 years old, had some surprise medical expenses during the year. To pay for these expenses (which were claimed as itemized deductions on his tax return), he received a $20,000 distribution from his traditional IRA (he has only made deductible contributions to the IRA). Assuming his marginal ordinary income tax rate is 15%, what amount of taxes and/or early distribution penalties will Bryan be required to pay on this distribution?

Question

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Because the IRA distribution was used for qualified medical expenses it is not subject to the 10 percent early distribution penalty but the full amount of the distribution is subject to the regular income tax ($20,000 × 15%).

Bryan, Who Is 45 Years Old, Had Some Surprise Medical