Hardship Withdrawal Request under final regs

[Pammie57]

I have a client whose home was destroyed in March by tornado.  With the cost of lumber going up so much - they need to take a distribution from their 401k to pay the additional expense to rebuild that insurance did not cover.  Could that be a reason for a hardship withdrawal or just an inservice with 20% withholding?  Rebuilding on the same lot.  Thanks!

[C. B. Zeller]

The rule is that it has to be for repair of damage to the participant's principal residence due to a casualty loss that would be deductible under sec. 165, but without regard to whether it was located within a federally declared disaster area. The situation you described sounds to me like it would qualify but I am not an expert on section 165.

[RatherBeGolfing]

9 hours ago, C. B. Zeller said:

The rule is that it has to be for repair of damage to the participant's principal residence due to a casualty loss that would be deductible under sec. 165, but without regard to whether it was located within a federally declared disaster area.

You also disregard the sec 165 requirement that only losses in excess of 10% AGI are deductible 

[Gilmore]

I wonder if it's also possible the area was declared a disaster area by FEMA under the new safe harbor option.

Also, coronavirus-related distributions are still available until 12/30 if the plan allows and the participant qualifies.