Individual retirement accounts (IRAs) encourage savers to stay the course and not withdraw m🍎oney before the age of 59½. Withdrawals prior to 59½ incur a 10% penalty tax levied by the Internal Revenue Service (IRS) in addition to any regular tax that is due. However, there are a few exceptions to this rule, such as when a withdrawal is used for qualifying education expenses or to purchase your first home.

What Is an IRA?

An IRA is a tax-advantaged account designed to save money for retirement. To contribute to an IRA, you must have sufficient 澳洲幸运5官方开奖结果体彩网:earned income and other types of eligible compensation. IRAs are used mainly by self-employed people who don't have access to non-IRA workplace retirement savings accounts, such as a 401(k). Any type of IRA can be used by investors to supplement their savings in 401(k) and similar plans. IRAs typically offer a wider variety of investment options than 澳洲幸运5官方开奖结果体彩网:401(k)-type plans.

A 澳洲幸运5官方开奖结果体彩网:traditional IRA allows investors to save money on a tax-deferred basis. Taxes are paid only at the time of withdrawal and are assessed as ordinary income. You can contribute to a traditional IRA no matter how much you make annually, so long as your contribution is not larger than the smaller of the following: either the IRS’s 2025 contribution limit of $7,000 (plus up to another $1,000 if you are age 50 or older) or your earned income—which the IRS calls your taxable compensation. The rules for deducting a contribution are different, and they depend on your filing status and income. For example, your traditional IRA deduction may be reduced or phased out until it is eliminated if your 澳洲幸运5官方开奖结果体彩♑网:modified adju💃sted gross income (MAGI) exceeds certain thresholds.

A Roth IRA offers no upfront deduction, so no deduction phaseout ranges apply to it. Contributions are made with after-tax money. Eligibility for contributions, however, requires taxable compensation and is subject to phaseout ranges and limits. Investment gains and withdrawals are tax-free if you follow certain rules.♛

The Penalty-Free IRA Withdrawals

Once individuals open an IRA account and begin saving, they have an incentive not to withdraw the money until retirement. The 10% penalty tax is designed to discourage peo⛄ple from taking money out in a fleeting moment of fear or greed or to pay for non-retirement expenditures.

However, life happens. Unexpected priorities that aren't related to retirement arise. The tax code makes allowances and provides exceptions to the 10% penalty. Such exceptions have changed over the years. Here is a list of the 10 most notable exceptions in 2025, of the nearly 20 available.

Paying for College

If an individual needs to further their education, they can withdraw savings from their IRA at an eligible post-secondary school without incurring the 10% tax penalty for qualified expenses like tuition, books, room, and board for anyone enrolled at least as a half-time student.

Buying a Home

Home ownership is encouraged by the tax code and this exception is one example of many along that theme. Withdrawals up to $10,000 used for first-time home buyers aren't subject to the penalty. Withdrawals used for reconstructing a first home after a disaster also fall under this exception.

Inheriting an IRA

If an individual inherits an IRA account, they are required to withdraw all funds within 10 years of the original owner's death. Fortunately, none of these withdrawals are subject to the 10% penalty.

Recalled to Active Duty

Individuals serving in a military reserve unit can 𒅌be called up to active duty at any time. Should the💃y need to make withdrawals from an IRA account to cover expenses during this period, they can do so without paying any penalty.

Required to Fulfill an IRS Levy

Anyone who fails to pay previous years' taxes is subject to collection measures from the IRS. The IRS can levy the retirement accounts of a delinquent taxpayer to fulfill the obligation. In that event, the 10% additional penalty is not assessed.

Required to Make ♋Substantially Equal Periodic Paymen𒐪ts

Withdrawals are exempt from the 10% penalty if they are made as a series of substantially equal periodic payments based on the taxpayer’s life expectancy. To do this penalty-free, they must calculate these payments using one of the three methods provided by the IRS: required minimum distribution, fixed amortization, or fixed annuitization. 

Withdrawals used to pay unreimbursed medical expenses in any amount beyond 7.5% of the taxpayer's 澳洲幸运5官方开奖结果体彩网:adjusted gross income (AGI) are not subject to the penalty. This is true even if the taxpayer doesn’t itemize deductions.

Paying for Health Insurance While Unemployed

The IRS allows for exceptions from the penalty for those who have lost their job, even if they have received unemployment compensation. Withdrawals made even after being reemployed are𝓰 still exempt from the penalty so long as new employment is less than 60 days away.

Permanent Disability

Individuals who become disabled, as determined by a physician, can take w🐷ithdrawals from their IRA without having to pay the penalty. This refers to condi🐬tions of indefinite or lifetime duration and includes conditions related to either physical or mental capacity.

Victim of Domestic Abuse

A 澳洲幸运5官方开奖结果体彩网:distribution up to the lesser of $10,000 or 50% of the account balance taken from an IRA𒅌 account for a domestic abuse victim is not su🅷bject to the penalty. This exception is new for the 2024 tax filing year and applies to those who take a distribution within one year of the date they were a victim of abuse.

The Bottom Line

The purpose of the 10% penalty tax is to create an incentive for people to leave their retirement s🏅avings intact except for retirement-related withdrawals. These 10 exceptions in the tax code allow for special circumstances in life when an individual may need carefully planned or emergency access to those savings f🦩or non-retirement expenses.