K

Early withdrawals from a traditional IRA before age 59½ generally incur a 10% 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.
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% 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.
Emergency expenses
Starting January 1, 2024, you can withdraw up to $1,000 annually for emergency personal expenses without penalty.
Disaster recovery
Withdrawals for qualified disaster recovery expenses are exempt from the penalty, up to an aggregate limit of $22,000.
Disability
If you are disabled and cannot engage in substantial gainful activity, you can withdraw funds without penalty.
Long-term care
Beginning December 29, 2025, you can take penalty-free withdrawals for qualified long-term care expenses.
Terminal illness
Withdrawals due to terminal illness are exempt from the penalty.
Post-death withdrawals
Amounts withdrawn after the IRA owner’s death are not subject to the penalty.
Military reservists
Active-duty military reservists called to duty for at least 180 days can withdraw funds without penalty.
Health insurance premiums during unemployment
If you receive unemployment compensation for 12 consecutive weeks, you can withdraw funds to pay for health insurance premiums without penalty.
Domestic abuse victims
Starting January 1, 2024, you can take penalty-free withdrawals of up to $10,000 if you are a victim of domestic abuse.
IRS levies
Withdrawals to pay IRS levies on the IRA account are not subject to the penalty.
It’s important to note that SIMPLE IRAs incur a 25% penalty for early withdrawals within the first two years of participation. Additionally, Roth IRAs have different rules, allowing penalty-free access to contributions but potentially taxing and penalizing withdrawals of earnings.
We provide these articles as general information and not individualized tax advice. They do not constitute a client relationship with you, and any information provided here should be applied at your own risk.