Distributions from retirement accounts (such as IRAs and 401ks) are not only considered part of your taxable income, but are also generally subject to an additional 10% penalty for early withdrawals if you are under the age of 59 ½. However, there are a few ways to take early distributions while entirely avoiding the second penalty tax.
Here are 9 exceptions to the 10% Early withdrawal penalty:
1. IRA owner is age 59 1/2 or older
2. Death or disability of the IRA owner
3. Series of substantially equal payments over the life of the IRA owners (or joint lives of the IRA owner and beneficiary)
4. Payment to the extent qualified medical expenses exceed 7.5 or 10% of the AGI depending on the tax year
5. Payment of health insurance for certain unemployed individuals
6. Payment of qualified higher education expenses
7. Payment of qualified first time home purchases
8. Payment due to IRS levy
9. Qualified distribution made to certain military reservists
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