Avoiding Penalties: Early IRA Withdrawals Explained

ARTICLE | September 10, 2024

Authored by Vasquez + Company

This article, "Legitimate Ways to Avoid a 10% Penalty Tax on Early IRA Withdrawals," outlines various exceptions to the early withdrawal penalty for traditional IRA distributions taken before age 59½. Understanding these exceptions can help individuals access their retirement funds without incurring additional tax penalties.

Key Points

• Substantially Equal Periodic Payments (SEPPs): Allows withdrawals through a series of annual payouts, which can be complicated and should involve a tax professional.
• Medical Expenses: Withdrawals for unreimbursed medical expenses exceeding 7.5% of adjusted gross income (AGI) are penalty-free.
• Education and Home Expenses: Early withdrawals for qualified higher education and home acquisition costs can avoid penalties.
• Emergency and Disaster Recovery: New exceptions for emergency expenses and qualified disaster recovery distributions provide additional flexibility.
• Other Exceptions: Includes withdrawals for births, adoptions, disabilities, terminal illness, military service, and more.

This comprehensive guide equips readers with the knowledge needed to make informed decisions about early IRA withdrawals while avoiding the 10% penalty tax.

For more information, read the full article here.

Our firm provides the information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. This article is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.