Avoiding the 10% Tax Penalty From an IRA

If you have an Individual Retirement Account (IRA) set up, you more than likely have heard that you should not dip into it before you're 59 and a half or you will face a 10-percent tax penalty. 

This is true, and it has been set up that way to try and keep people from spending their retirement money early. 

However, sometimes economic hardships require taking an early withdrawal out of these accounts. The question I often see asked is if there are any exceptions to this 10-percent penalty. 

Great news, there is! Here is a list of situations, subject to various requirements, that the penalty for early withdrawal does not apply:

• To pay for qualified higher education expenses.

• First-time home-buying expenses ($10,000 limit). 

• Distributions to the beneficiary of the original account holder.  

• To pay for an IRS tax levy. 

• Due to disability. 

• Paid to qualified military reservists called to active duty. 

• To pay for medical insurance during extended periods of unemployment. 

• The amount not in excess of deductible medical expenses.

Please feel free to leave comments or ask me any questions.

Brent Reinsberg, CPA - Mazanec, Bauer & Associates

brent.reinsberg@mazanecbauer.com