What Are the Exceptions to the IRA Early Withdrawal Penalty?

If you pull money out of an IRA before age 59½, the IRS normally adds a 10% tax on top of the regular income tax on the distribution. The exceptions to the IRA early withdrawal penalty are the specific situations where that extra 10% is waived — medical bills above a threshold, disability, higher education, a first home, the birth or adoption of a child, certain emergencies, disaster losses, domestic abuse, active-duty reserve service, an IRS levy, the account owner’s death, and a few structured payment arrangements. Regular income tax on a traditional IRA distribution still applies in most of these situations; only the 10% add-on goes away.

Several of the newer exceptions took effect after December 31, 2023, under the SECURE 2.0 Act, so options that did not exist a few years ago may fit your situation now.

Quick List of the Exceptions and Their Limits

Unreimbursed medical expenses above 7.5% of adjusted gross income
Total and permanent disability, certified by a physician
Terminal illness (no dollar cap; three-year repayment window)
Health insurance premiums after 12 consecutive weeks of unemployment
Qualified higher education expenses for you, your spouse, children, or grandchildren
First-time home purchase, up to a $10,000 lifetime cap
Birth or adoption, up to $5,000 per parent per event
Emergency personal expenses, up to $1,000 per calendar year
Domestic abuse victim distributions, up to the lesser of $10,000 (indexed) or 50% of the account
Federally declared disaster recovery, up to $22,000 per disaster
Death of the account owner (distributions to beneficiaries)
IRS levy on the retirement account
Substantially equal periodic payments (a 72(t) or SEPP arrangement)
Qualified reservist distributions during active duty of more than 179 days

Health and Medical Reasons

Unreimbursed medical costs qualify only to the extent they exceed 7.5% of your adjusted gross income for the year, and you get this exception whether or not you itemize deductions. If your AGI is $80,000, the first $6,000 of medical costs doesn’t count; anything above that can come out of the IRA penalty-free.¹

Total and permanent disability is a separate exception. You must be unable to do any substantial work because of a physical or mental condition, and a physician has to certify that the condition is expected to result in death or last indefinitely.²

Terminal illness, added by SECURE 2.0, applies when a physician certifies a condition expected to result in death within 84 months. There is no dollar cap, and you can repay the distribution to an eligible retirement account within three years.³

If you lost your job and collected unemployment for at least 12 consecutive weeks, IRA money used to pay health insurance premiums for you and your family escapes the penalty. The withdrawal must happen in the year you received unemployment or the following year, and only the amount you actually paid in premiums qualifies.³

Education, a First Home, and a New Child

Qualified higher education expenses cover tuition, fees, books, supplies, and required equipment at an accredited college, university, or vocational school for you, your spouse, your children or stepchildren, or your grandchildren. Room and board count only if the student is enrolled at least half-time. The penalty-free amount equals the actual expenses paid minus any scholarships, grants, or tax-free assistance.⁴

The first-time home purchase exception lets you take up to $10,000 toward buying, building, or rebuilding a principal residence. It is a lifetime cap, not annual, and it has not been indexed for inflation — the ceiling stays at $10,000 for 2026. You qualify if neither you nor your spouse owned a main home in the two years before the purchase date. A child, grandchild, or parent who meets the same first-time buyer definition can also be the beneficiary of the withdrawal.³

For a birth or a finalized adoption, each parent can withdraw up to $5,000 per event within one year of the date. An adoptee must be under 18 or unable to support themselves. You can repay the distribution later to an eligible retirement account, and the repaid amount is treated as a tax-free rollover.⁵

Emergencies and Hardship

SECURE 2.0 added three exceptions aimed at financial pressure. One calendar-year emergency personal expense distribution is allowed, capped at the lesser of $1,000 or the vested balance above $1,000. You don’t have to document the emergency, but if you repay within three years, you generally cannot take another emergency distribution until the earlier one is repaid.³

Domestic abuse victims can withdraw the lesser of $10,000 (indexed for inflation) or 50% of the account balance, taken within the one-year period beginning on the date of the abuse. You have three years from the day after the distribution to repay some or all of it as a tax-free rollover.⁶

Qualified disaster recovery distributions apply if you live in a federally declared disaster area and suffer an economic loss. The cap is $22,000 per disaster, and the withdrawal has to happen within 180 days after the applicable disaster date. Repayment to an eligible retirement account is again treated as a tax-free rollover.¹

Involuntary Distributions and Structured Payments

When an IRA owner dies, distributions to a named beneficiary or the estate are not hit with the 10% penalty regardless of the recipient’s age. Regular income tax generally still applies.⁵

If the IRS levies your retirement account to collect unpaid federal taxes, the seized amount is exempt from the additional tax. Cashing out voluntarily to pay a tax debt does not count; only an IRS-initiated levy qualifies.³

Substantially equal periodic payments, often called a 72(t) or SEPP, waive the penalty in exchange for locking in a schedule. Payments are based on your life expectancy, taken at least annually, and must continue for the longer of five years or until you turn 59½.¹ Change the schedule before the period ends and the IRS retroactively applies the 10% penalty to every prior distribution under the arrangement, plus interest for the entire deferral period.⁷

Members of a reserve component called to active duty for more than 179 days, or for an indefinite period, can take penalty-free IRA distributions during that active-duty period. You have two years after the active-duty period ends to repay any of it, and the repayment isn’t limited by the normal annual IRA contribution caps.¹

How Roth IRAs Change the Picture

Every exception above works for both traditional and Roth IRAs, but the Roth has a built-in cushion that often makes the exceptions unnecessary. You can withdraw your original Roth contributions at any age, for any reason, tax- and penalty-free. The IRS uses an ordering rule: regular contributions come out first, then conversion amounts, then earnings.⁵

Earnings are the piece that behaves differently. To take Roth earnings out fully tax- and penalty-free, you need to be at least 59½ (or fit one of the exceptions above) and have had a Roth IRA for at least five tax years. If you pull earnings before meeting both conditions, income tax and potentially the 10% penalty apply to that earnings portion — though the same exceptions can waive the penalty just as they do for traditional IRA distributions.⁵

How to Claim the Exception on Your Return

An exception is not automatic. Your IRA custodian reports the distribution to the IRS, usually with a code indicating an early withdrawal, and it’s on you to tell the IRS why the 10% shouldn’t apply.

The form for this is IRS Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.” On Line 2 you enter a two-digit exception code — for example, 09 for a first-time home purchase or 05 for disability. If more than one exception applies to the same distribution, use code 99. File Form 5329 with your Form 1040; most tax software attaches it automatically once you identify the reason.⁸⁹

You don’t mail supporting documents with the return, but the IRS can ask for them later. Keep records that match the exception you claimed:

Medical expenses: itemized receipts, insurance statements, and explanation-of-benefits forms showing costs above the 7.5% threshold.
Education: Form 1098-T from the school, plus receipts for books, supplies, and room and board if the student was at least half-time.⁴
First home: purchase contract, closing disclosure, and title documents confirming the property is your principal residence.
Birth or adoption: birth certificate or adoption decree, and records showing the withdrawal came within one year of the event.
Disability or terminal illness: the physician’s written certification.

Hold on to those records for at least three years after filing the return that claimed the exception, which is the standard IRS examination window.¹⁰

1
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
2
Internal Revenue Service. Retirement Topics – Disability
3
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
4
Internal Revenue Service. Publication 970, Tax Benefits for Education
5
Internal Revenue Service. Publication 590-B, Distributions from Individual Retirement Arrangements
6
Internal Revenue Service. Notice 2024-55, Certain Exceptions to the 10 Percent Additional Tax
7
Internal Revenue Service. Substantially Equal Periodic Payments
8
Internal Revenue Service. 2025 Instructions for Form 5329
9
Internal Revenue Service. Instructions for Form 5329
10
Internal Revenue Service. How Long Should I Keep Records?