Under IRS safe harbor rules, seven categories of expenses automatically count as qualifying expenses for a 401(k) hardship withdrawal: unreimbursed medical costs, buying a principal residence, post-secondary education, preventing eviction or foreclosure, funeral and burial costs, repairing damage to your home, and losses from a federally declared disaster. Before any of that matters, though, your plan has to offer hardship distributions in the first place. Plans are allowed to include the feature but not required to, so check your Summary Plan Description or ask your plan administrator before you build a plan around one.1Internal Revenue Service. Retirement Plans FAQs Regarding Hardship Distributions
The Seven Safe Harbor Categories
The list sits in 26 CFR § 1.401(k)-1(d)(3)(ii)(B). An expense that fits one of these categories is automatically treated as an “immediate and heavy financial need,” so the plan administrator doesn’t have to second-guess whether your situation is severe enough.2eCFR. 26 CFR 1.401(k)-1 – Certain Cash or Deferred Arrangements
Unreimbursed Medical Expenses
Costs of medical care for you, your spouse, children, dependents, or a primary beneficiary under the plan. The expense has to be the kind that would be deductible under the tax code’s medical rules, but you don’t need to itemize or clear the adjusted gross income threshold to qualify.
Buying a Principal Residence
Down payment and closing costs on your primary home. Ordinary monthly mortgage payments don’t count, and neither does refinancing or paying down an existing loan. The expense has to relate to the initial purchase.
Post-Secondary Education
Tuition, related fees, and room and board for the next 12 months, for you, your spouse, your child, a dependent, or a primary beneficiary. Old student loan balances do not qualify.
Preventing Eviction or Foreclosure
Payments necessary to keep you from being evicted from your principal residence or from having the mortgage on it foreclosed.
Funeral and Burial Expenses
Costs tied to the death of your parent, spouse, child, dependent, or a deceased primary beneficiary under the plan.
Repairing Damage to Your Home
Repairs to your principal residence that would qualify as a casualty loss under the tax code. The regulation specifically ignores the post-2017 rule that limits casualty deductions to federally declared disasters, so damage from a house fire, a burst pipe, or a localized storm can qualify here even without a FEMA declaration.
Federally Declared Disaster Losses
Expenses and losses, including property damage and lost income, from a disaster FEMA has designated for individual assistance. Your principal residence or principal place of employment has to have been in the designated area when the disaster hit.
The home-repair and disaster categories can both fit a bad storm, but they serve different purposes. When there’s no FEMA declaration, only the home-repair category is available to you.2eCFR. 26 CFR 1.401(k)-1 – Certain Cash or Deferred Arrangements
Who Counts as a Primary Beneficiary
Three of the categories — medical, education, and funeral — reach past your immediate family to cover a “primary beneficiary under the plan.” That term has a narrow meaning. The IRS defines a primary beneficiary as someone you have actually designated on your 401(k) account with an unconditional right to all or part of the balance if you die.3Internal Revenue Service. Issue Snapshot – Hardship Distributions From 401(k) Plans
So a sibling, parent, or domestic partner you’ve named on the plan can support a hardship withdrawal for their qualifying bills. A close friend, or a relative you haven’t formally designated, cannot, no matter how significant the relationship.
How Much You Can Withdraw
The distribution is capped at the amount you actually need to cover the expense. The IRS lets you add money on top of that for the federal and state income taxes and the 10% early withdrawal penalty you’ll owe on the distribution itself.1Internal Revenue Service. Retirement Plans FAQs Regarding Hardship Distributions
People sometimes call this “grossing up.” If you need $10,000 for a medical bill and you expect roughly 22% federal tax plus the 10% penalty, you could request about $14,700 so the net covers the actual expense. The exact figure depends on your federal bracket, your state’s rate, and whether any penalty exceptions apply to you. Requesting too little leaves you short of the bill; requesting too much should get rejected by the plan administrator.
What You’ll Need to Show
The paperwork depends on your plan. Many plans now accept self-certification, where you sign a statement confirming the distribution is for one of the safe harbor reasons, the amount doesn’t exceed what you need, and you have no other reasonable way to cover the expense. No receipts or contracts change hands.
Plans that don’t use self-certification will ask for supporting documents. Medical requests usually need copies of unpaid bills showing the balance. A home purchase needs a signed purchase agreement. Eviction or foreclosure situations call for court filings or official notices. Education expenses require a tuition statement for the upcoming term.
Either way, keep your own records. The IRS asks you to hold documents supporting items on your return for at least three years from the filing date, and a hardship distribution will land on your return.4Internal Revenue Service. Topic No. 305, Recordkeeping
What It Costs You in Taxes
A hardship distribution is taxable income in the year you take it, reported on Form 1099-R.5Internal Revenue Service. Hardships, Early Withdrawals and Loans The plan withholds 10% for federal tax by default. You can elect out of withholding or ask for a higher rate on Form W-4R. The mandatory 20% withholding that applies to rollover-eligible distributions doesn’t apply here.
Withholding is only a prepayment. Your actual bill depends on your total income for the year. For 2026, federal rates run from 10% on the first $12,400 of taxable income up to 37% above $640,600 for single filers.6Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 State income tax stacks on top of that in most states, and some require withholding you can’t waive.
The 10% additional tax on distributions before age 59½ applies to most hardship withdrawals. Qualifying as a hardship does not exempt you from this penalty. There are separate exceptions to the early-withdrawal penalty, such as separation from service in the year you turn 55 or older, or medical expenses above a set share of your adjusted gross income, but those depend on your specific facts rather than on the hardship label.7Internal Revenue Service. Topic No. 558, Additional Tax on Early Distributions From Retirement Plans Other Than IRAs
The Money Doesn’t Come Back
Hardship distributions cannot be repaid to the plan or rolled into another retirement account. Once the funds leave as a hardship withdrawal, they are gone. You lose the amount withdrawn along with every dollar of growth it would have earned between now and retirement.5Internal Revenue Service. Hardships, Early Withdrawals and Loans
If your plan allows 401(k) loans, that mechanism works differently, since you borrow from your own balance and repay it with interest. Plans used to be able to force you to take a loan before a hardship distribution; that requirement is now optional and left to the plan.1Internal Revenue Service. Retirement Plans FAQs Regarding Hardship Distributions
Starting in 2024, the SECURE 2.0 Act added a separate emergency personal expense distribution that some plans have adopted. It caps out at $1,000 per year (or your vested balance minus $1,000, if less), you self-certify the need without matching a safe harbor category, and you can repay it within three years and treat the repayment as a rollover that undoes the tax hit. SECURE 2.0 also created a distribution for domestic abuse victims of up to the lesser of $10,000 (indexed) or 50% of the account balance, also repayable within three years. Neither is automatic; ask whether your plan offers them before assuming a hardship withdrawal is your only option.