What Qualifies for a Hardship Withdrawal From an IRA?

An IRA doesn’t offer a “hardship withdrawal” in the formal sense that a 401(k) does, but federal tax law lists more than a dozen situations that let you take an early hardship withdrawal from an IRA without the usual 10% penalty. These qualifying situations range from large unreimbursed medical bills and a first home purchase to newer categories added in 2024 for emergency expenses, terminal illness, domestic abuse, and federally declared disasters. One thing to understand up front: waiving the 10% penalty does not waive income tax. Money coming out of a traditional IRA is still taxed as ordinary income in the year you receive it, no matter which exception you qualify for.¹ Your custodian will generally withhold 10% for federal taxes unless you choose otherwise, so plan for a possible shortfall at filing time.

Established Situations That Qualify

Section 72(t) of the Internal Revenue Code sets out the specific circumstances that remove the 10% early-distribution penalty. These have been on the books for years and apply directly to IRAs.²

Large Unreimbursed Medical Expenses

You can withdraw penalty-free to cover unreimbursed medical costs that exceed 7.5% of your adjusted gross income for the year. Only the portion above the 7.5% threshold qualifies. If your AGI is $60,000 and you have $8,000 in unreimbursed medical bills, the penalty-free amount is $3,500 ($8,000 minus $4,500).²

Health Insurance Premiums While Unemployed

If you received unemployment compensation for 12 consecutive weeks, you can take penalty-free distributions to pay health insurance premiums for yourself, your spouse, and your dependents. The distributions must occur in the tax year you received unemployment or the following year and cannot exceed the premiums you actually paid. The exception ends once you have been re-employed for at least 60 days.³

Higher Education Costs

Qualified education expenses for you, your spouse, your children, or your grandchildren qualify. Eligible costs include tuition, fees, books, supplies, and equipment required for enrollment at an accredited postsecondary school. Room and board also count if the student is enrolled at least half-time in a degree or certificate program. There is no dollar cap; the withdrawal simply needs to match actual qualified expenses.²

First-Time Home Purchase

You can withdraw up to $10,000 over your lifetime to buy, build, or rebuild a principal residence.² “First-time” is broader than it sounds: you qualify as long as you (and your spouse, if married) have not owned a principal residence in the two years ending on the date you acquire the new home.⁴ The funds must be used within 120 days of the distribution.⁵ The $10,000 cap is per person, so a married couple with separate IRAs could combine for up to $20,000 toward the same purchase.

Birth or Adoption of a Child

Each parent can withdraw up to $5,000 per child within one year of a birth or finalized adoption. You can later repay the amount to a retirement account, and there is no hard deadline for doing so.²

Permanent and Total Disability

You qualify if a medical condition prevents you from doing any substantial gainful work and a physician determines it can be expected to result in death or to last continuously for at least 12 months. You need a written physician’s certification stating the nature of the condition and its expected duration.⁶

Death of the Account Holder

When an IRA owner dies, beneficiaries can take distributions without the 10% penalty regardless of their own age. This applies to spouses, children, other named individuals, and distributions paid to an estate or trust.²

IRS Levy

If the IRS seizes IRA assets to satisfy a federal tax debt, the amount taken is not subject to the 10% penalty.²

Called-Up Military Reservists

Reservists called to active duty for at least 180 days can take penalty-free IRA distributions during the active-duty period.²

Substantially Equal Periodic Payments

You can avoid the penalty without proving any hardship at all by setting up a series of substantially equal periodic payments (a “72(t) schedule”) based on your life expectancy. Once you start, you must continue the payments until the later of five years or the date you turn 59½. Stopping early or changing the payment amount triggers a retroactive recapture tax on all prior distributions.⁷

Newer Situations Added by SECURE 2.0

The SECURE 2.0 Act, passed in late 2022, added several exceptions that took effect in 2024 and beyond. These cover situations Congress felt the older list missed.

Terminal Illness

If a physician certifies that you have a condition reasonably expected to result in death within 84 months, distributions from your IRA are exempt from the 10% penalty. The certification must be obtained at or before the time of the distribution. The exception applies to distributions made after December 29, 2022.²

Emergency Personal Expenses

Starting in 2024, you can take one penalty-free distribution per calendar year for an unforeseeable or immediate personal or family financial emergency. The amount is capped at the lesser of $1,000 or your vested account balance in excess of $1,000.² This is the closest thing an IRA has to a true hardship withdrawal, because it does not require you to prove which specific expense triggered the need.

Domestic Abuse

If you are a victim of domestic abuse by a spouse or domestic partner, you can take a penalty-free distribution of up to the lesser of $10,000 (indexed for inflation) or 50% of your vested account balance. The distribution must occur within one year of the abuse. You have three years to repay the amount to a retirement account, and any repaid portion is treated as a tax-free rollover.⁸

Federally Declared Disaster

If your principal residence is in a federally declared disaster area and you suffered an economic loss such as property damage, displacement, or job loss, you can withdraw up to $22,000 penalty-free across all your retirement accounts and IRAs. You can spread the income over three tax years and repay the distribution within that same three-year window to recover the taxes paid.⁹

Roth IRA Contributions Are Different

If your IRA is a Roth, you may not need an exception at all. Your direct contributions (not earnings, and not converted amounts) can be withdrawn at any time, at any age, for any reason, free of both income tax and the 10% penalty. Roth distributions are treated as coming from your contributions first before touching earnings or conversions.¹⁰

Earnings on Roth contributions work differently. To pull earnings out fully tax-free and penalty-free, two conditions must both be met: at least five years must have passed since your first Roth contribution, and you must be 59½ or older (or meet an exception such as disability, death, or the $10,000 first-home purchase). If you withdraw earnings before both conditions are met, the earnings portion may face income tax and the 10% penalty, though the same exceptions listed above can waive that penalty.

How to Claim the Exception When You File

Start by contacting your IRA custodian and completing a distribution request form. The custodian reports the withdrawal to the IRS using a code. Code 1, “early distribution, no known exception,” is what a custodian typically uses when it has no way to verify your exception, even when you legitimately qualify.¹¹ Seeing Code 1 on your paperwork does not mean you owe the penalty; it just means the custodian isn’t the one making that call.

By the following January, you’ll receive Form 1099-R showing the total distributed and the code used. When you file your return, you claim the exception on Form 5329, Part I. You enter an exception number on Line 2 matching your situation, for example 03 for disability, 08 for education expenses, 09 for a first home purchase, or 20 for terminal illness. If more than one exception applies, enter 99. Filing Form 5329 correctly is what actually keeps the IRS from assessing the 10% penalty; skipping the form can trigger an automatic penalty notice even when you qualify.¹⁰

Documentation to Keep

The IRS does not require you to attach proof when you file, but you need records ready in case the return is questioned. What to keep depends on the exception:

Medical expenses: itemized provider invoices, insurance explanation-of-benefits statements showing what was reimbursed, and records of premiums paid while unemployed.
Education: tuition billing statements or Form 1098-T from the school, plus receipts for books, supplies, and room and board.
First home purchase: the signed closing disclosure, purchase contract, and proof the funds were spent within 120 days.
Birth or adoption: a birth certificate or adoption decree, plus records showing the distribution was taken within one year of that date.
Disability: a physician’s written certification that the condition prevents any substantial gainful work and is expected to result in death or last at least 12 months.
Disaster recovery: FEMA declaration information, proof of residence in the disaster area, and documentation of your economic loss.

Keep your filed returns, Form 1099-R, and Form 5329 for at least three years from the filing date or two years from the date you paid the tax, whichever is later.¹²

1
Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements
2
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
3
Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
4
Cornell Law Institute. 26 U.S. Code 72 – Definition: First-Time Homebuyer
5
Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements
6
Office of the Law Revision Counsel. 26 U.S.C. 22 – Credit for the Elderly and the Permanently and Totally Disabled
7
Internal Revenue Service. Substantially Equal Periodic Payments
8
Internal Revenue Service. Notice 2024-55 – Certain Exceptions to the 10 Percent Additional Tax
9
Internal Revenue Service. Disaster Relief Frequent Asked Questions – Retirement Plans and IRAs Under the SECURE 2.0 Act of 2022
10
Internal Revenue Service. Instructions for Form 5329 (2025)
11
Internal Revenue Service. Instructions for Forms 1099-R and 5498
12
Internal Revenue Service. How Long Should I Keep Records?