Early IRA Withdrawals
Early withdrawals from a traditional IRA before age 59 1/2 generally incur a 10 percent penalty tax on the taxable portion of the withdrawal. There are several exceptions to this rule that can help you avoid the penalty under specific circumstances. Below, we have outlined the key exceptions that may apply to your situation.
Key Exceptions to the Early IRA Withdrawals Penalty
Substantially equal periodic payments. You can arrange for a series of substantially equal periodic payments. This method requires careful calculation and adherence to strict rules but allows penalty-free withdrawals.
Medical expenses. Withdrawals for medical expenses exceeding 7.5 percent of your adjusted gross income, or AGI, are exempt from the penalty.
Higher education expenses. You can use penalty-free withdrawals for qualified higher education expenses for you, your spouse, and your children.
First-time home purchase. You can withdraw up to $10,000 (lifetime limit) for qualified home acquisition costs without penalty.
Birth or adoption. You can withdraw up to $5,000 for expenses related to the birth or adoption of a child.