Skip to content
Independent money guidance
Clear Money Guide
Start here
Menu

Form 5329 Exception Code 05: Unreimbursed Medical Expenses

Updated October 17, 2026. Quick answer: Exception code 05 on Form 5329 covers distributions up to the unreimbursed medical expenses you paid during the year minus 7.5% of your adjusted gross income. You enter that amount on line 2 with 05 beside it. You do not have to itemize to use it.

Related reading on this site: IRS Publication 502.

Schedule A and Schedule B (Form 1040) for 2025, read line by line: Schedule A lines 1 to 4.

What code 05 means

The instructions define it in one sentence: “Qualified retirement plan distributions up to the amount you paid for unreimbursed medical expenses during the year minus 7.5% of your adjusted gross income (AGI) for the year.” So the exception is capped. It does not cover a whole distribution unless your qualifying expenses are big enough to cover it.

The IRA version

Publication 590-B states the IRA rule: “If you have unreimbursed medical expenses (that would qualify for a medical deduction) in excess of 7.5% of your adjusted gross income” “you don’t have to pay the 10% additional tax on distributions from your IRA up to the amount by which those qualifying medical expenses exceed 7.5% of your adjusted gross income.”

It defines the income figure: “This is the amount on Form 1040, 1040-SR, or 1040-NR, line 11a.” The kinds of expenses that count are limited: “You can only take into account unreimbursed medical expenses that you would be able to include in figuring a deduction for medical expenses on Schedule A (Form 1040).”

Plans and the itemizing question

Publication 575 states the plan rule: “to the extent you have deductible medical expenses that exceed 7.5% of your AGI, whether or not you itemize your deductions for the year”. Publication 590-B says the same for IRAs: “You don’t have to itemize your deductions to take advantage of this exception to the 10% additional tax.” Medical expenses for a parent are a common question; see the page on deducting a parent’s medical expenses.

How to claim it on Form 5329

Enter the qualifying amount on line 2 of Part I. The instructions say “Enter on line 2 the amount that you can exclude.” “In the space provided, enter the applicable exception number”. Here that number is 05. Publication 575 adds “On line 2, enter the amount that can be excluded and the exception number shown in the Form 5329 instructions.” If more than one exception applies, “enter 99.” See Form 5329 exception code 99.

As an illustration, not an IRS example: suppose your AGI is $60,000. The 7.5% figure is $60,000 times 0.075, which is $4,500. If your unreimbursed medical expenses for the year are $9,000, the excess is $9,000 minus $4,500, which is $4,500, so up to $4,500 of a distribution could go on line 2.

Where it goes next

Line 2 comes off line 1 to give line 3: “Amount subject to additional tax. Subtract line 2 from line 1”. Line 4 is “Additional tax. Enter 10% (0.10) of line 3.” and the form says “Include this amount on Schedule 2 (Form 1040), line 8”. See Form 5329 lines 1 to 4 for the four lines together, Form 5329 explained for the whole form and early withdrawal penalty exceptions for the list of exceptions.

Edition and line numbers

This page reads the 2025 Form 5329 and its 2025 instructions, along with the 2025-returns editions of the two Publications it cites, the current files irs.gov served on 2026-10-17. They are the forms for the tax year 2025 return, filed in 2026. Check the tax year printed on the form you are filling in and use the line numbers and exception numbers on that year’s form, because a different year’s form can number or word its lines and exceptions differently.

Common mistakes

  • Using all medical expenses. Publication 590-B says “You can only take into account unreimbursed medical expenses that you would be able to include in figuring a deduction for medical expenses on Schedule A (Form 1040).”
  • Skipping the exception because you take the standard deduction. Publication 590-B says “You don’t have to itemize your deductions to take advantage of this exception to the 10% additional tax.”
  • Excluding the whole distribution. The instructions cap it at “up to the amount you paid for unreimbursed medical expenses during the year minus 7.5% of your adjusted gross income (AGI) for the year.”

Related: Deducting a parent’s medical expenses, Form 1040, Schedule 2 (Form 1040), and Early withdrawal penalty exceptions.

Sources

Read from the IRS documents linked above on October 17, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.

Next step