72(t) exemption

[Felicia]

The early withdrawal penalty tax does not apply to a distribution used to pay medical expenses in excess of 7-1/2% of AGI. If an accountholder is married, filing jointly, can the distribution avoid the penalty if it is used to pay medical expenses for the spouse? children?

[Mary Kay Foss]

The exception in 72(t) references Code Section 213. I have always interpreted it as the expenses that would be deductible on the IRA owner's Form 1040; those would include expenses of a spouse and dependent children. The total must be deductible (in excess of the 7.5% floor) whether they itemize deductions or not.