IRA Rule: 10% Tax Exemptions

Did you know that with the IRA withdrawal rules that if you take out your money early you can be hit hard with penalty fees?

However, you may not have to pay the 10% additional tax on withdrawing your funds unless you meet a 5 year rule that applies, or it the following IRA exemptions:

  • You have reached age 59 1/2.
  • You are disabled.
  • You are the beneficiary of a deceased IRA owner.
  • You use the distribution to pay certain qualified first-time homebuyer amounts.
  • The distributions are part of a series of substantially equal payments.
  • You have significant unreimbursed medical expenses.
  • You are paying medical insurance premiums after losing your job.
  • The distributions are not more than your qualified higher education expenses.
  • The distribution is due to an IRS levy of the qualified plan.
  • The distribution is a qualified reservist distribution.
  • The distribution is a qualified disaster recovery-assistance distribution.
  • The distribution is a qualified recovery-assistance distribution.

Learn more about the current IRA rules to stay up-to-date so you will not be hit with any unexpected penalties or fees when it comes time to withdrawal your retirement funds.

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Lisa Simmons
Lisa Simmons
10 years ago

I want to withdraw 10,000 out of my IRA for a hardship. Will I have to pay a penalty and for taxes. How much would the taxes be?

Kim deReyna, CPA
10 years ago

If you do not qualify for one of the exemptions then you will have to pay the 10% penalty. However, you can write a letter to the IRS to request an abatement of those penalties and explain your hardshp in the letter. It is best to have a CPA write this for you as we have experience with this and are familiar with the verbage that should be used. One of the exemptions by the way is if you were unemployed and paid health insurance premiums during that time. Feel free to contact me at 404-375-1566 if you require more… Read more »

Schuyler Kauschinger
Schuyler Kauschinger
5 years ago
Reply to  Lisa Simmons

i would suggest you transfer that amount to a roth ira to then only pay the taxes on that added income without having to pay the penalty which allows you to withdraw some out over the year. look up roth ira info for more details.

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