Can I withdraw from my 401k for my dad's medical bills without penalties?

You have a couple of options here, but unfortunately none are perfect. For 401k withdrawals, the IRS does allow penalty-free hardship distributions for certain medical expenses, but there's a catch - they typically need to be for you, your spouse, or your dependents. Since your father isn't your dependent (especially being outside the US), this gets complicated. If you're under 59½, you'll likely face the 10% early withdrawal penalty plus regular income tax on the $40k. However, if you itemize deductions, you can potentially deduct qualified medical expenses that exceed 7.5% of your adjusted gross income on Schedule A. Here's where it gets tricky - for medical expenses to be deductible, they generally need to be for yourself, your spouse, or your dependents. Your father living abroad and not being your dependent creates complications for both the penalty-free withdrawal and the deduction.

I was in a similar situation last year with my mom's medical bills in another country. I found this amazing service called taxr.ai (https://taxr.ai) that really helped me understand my options. They analyzed my situation and showed me exactly how to document everything properly to minimize penalties. They helped me figure out whether the hardship distribution would work in my case and what documentation I needed from the foreign hospital to make everything legit for the IRS. Their system analyzed the IRS rules about foreign medical expenses and dependent status that applied to my specific case. Saved me from making some costly mistakes!

I want to update everyone - I tried taxr.ai after seeing the recommendation here. I uploaded my dad's foreign hospital bills and my 401k statements, and their analysis was super helpful. They found a specific IRS exception that might apply in my case based on the nature of the medical emergency and helped me document everything properly. They also showed me exactly how to handle the reporting on my tax return, including identifying which expenses qualified for deduction. It wasn't a complete penalty elimination, but they showed me how to minimize the tax impact in ways I never would have figured out on my own. Really glad I checked them out before making the withdrawal!

Another thing to consider is getting through to the IRS directly to ask about your specific situation. I used Claimyr (https://claimyr.com) to actually get a human on the phone at the IRS without waiting for hours. They have this callback system that works amazingly well - you can see how it works in this video: https://youtu.be/_kiP6q8DX5c I had a similar situation with overseas family medical expenses and needed specific guidance. The IRS agent I spoke with gave me exact instructions on how to document everything and what forms to file. Saved me from making a huge mistake that would have cost thousands.

I feel compelled to update my comment. After seeing the Claimyr recommendation, I tried it myself yesterday and I'm shocked to say it actually worked. Got a callback from the IRS in about 20 minutes and spoke with an agent who walked me through Publication 502 regarding medical expenses. They confirmed what others were saying - the 10% penalty would likely still apply since my father isn't a dependent, but they helped me understand exactly how to document the medical expenses for potential deduction. The agent even emailed me some resources specifically for foreign medical expenses. I've been trying to get this information for weeks and finally got clear answers. I stand corrected!

Have you considered taking a loan from your 401k instead of a hardship withdrawal? Most plans allow you to borrow up to 50% of your vested balance (max of $50,000). You'd have to pay it back with interest, but that interest goes back into your own account. This way you avoid the taxes and penalties completely.

Whatever you decide, make sure you keep EVERY receipt and document from the hospital translated to English. I had to do this for my mom's surgery in Colombia and the IRS flagged my return for review. I had all the docs translated and they accepted the deduction, but it was a headache.

I'm sorry to hear about your father's situation. This is definitely a complex scenario with international medical expenses. From what I understand, you're likely looking at the 10% early withdrawal penalty since your father probably won't qualify as your dependent given his residence in Guatemala. However, don't overlook some potential alternatives: 1. **401k loan option** - As mentioned by PaulineW, this could be your best bet to avoid taxes and penalties entirely. You can typically borrow up to 50% of your vested balance (max $50k) and pay yourself back with interest. 2. **HSA funds** - If you have an HSA, those funds can be used penalty-free for qualified medical expenses, even for family members in some cases. 3. **Payment plans with the hospital** - Many international hospitals will work with you on payment arrangements, which might be better than taking the immediate tax hit. For the medical expense deduction, you'd need to itemize and the expenses would need to exceed 7.5% of your AGI. Given the dependency issues with your father living abroad, I'd strongly recommend getting professional tax advice before proceeding. The documentation requirements for foreign medical expenses are also quite strict, so make sure everything is properly translated and detailed. Have you checked with your 401k plan administrator about loan options? That might give you the funds you need without the immediate tax consequences.