Which IRAs Have a 10% Early Withdrawal Penalty Before 59½?

You can avoid the 10% IRA early withdrawal penalty exceptions carved out by Internal Revenue Code Section 72(t) if your situation fits one of them: disability, death, terminal illness, large medical bills, health insurance premiums during unemployment, higher education costs, a first home, the birth or adoption of a child, an IRS levy, active-duty reservist call-up, a federally declared disaster, domestic abuse, a small emergency expense, or a properly structured series of equal periodic payments. Each exception waives only the 10% additional tax. You still owe ordinary income tax on any taxable amount you take from a Traditional IRA.

How the 10% Penalty Works Before Any Exception Applies

Section 72(t) adds a flat 10% tax on the taxable portion of any IRA distribution you take before age 59½.¹ Pull $10,000 from a fully deductible Traditional IRA at 45 while sitting in the 24% bracket, and you owe $2,400 in income tax plus a $1,000 penalty before any state tax touches it.

One boundary worth flagging up front: SIMPLE IRAs run on a stiffer rule during their first two years. If you withdraw from a SIMPLE IRA within two years of your employer’s first contribution to the account, the penalty is 25%, not 10%.² The clock runs from when contributions started flowing in, not from your enrollment date.

Death, Disability, and Terminal Illness

Distributions paid to a beneficiary or the estate after an IRA owner dies are penalty-free.¹ Income tax on Traditional IRA money still applies to the recipient, but the 10% is gone.

If you become totally and permanently disabled, your own distributions are penalty-free. The IRS defines disability as being unable to perform any substantial gainful activity because of a physical or mental condition expected to result in death or last indefinitely, and you have to be able to prove it.¹

The SECURE 2.0 Act added a separate exception for terminal illness. A physician other than yourself has to certify that your condition is reasonably expected to result in death within 84 months.¹ There is no dollar cap, and the standard is looser than total disability because you can still be functional day to day.

Medical Bills and Health Insurance While Unemployed

You can withdraw penalty-free to cover unreimbursed medical expenses, but only the amount above 7.5% of your adjusted gross income qualifies.² With an $80,000 AGI, the first $6,000 of medical costs is on the wrong side of the threshold; only what you pay above that can be covered by a penalty-free withdrawal, and the distribution has to happen in the same tax year the bills are paid.

If you lose your job and collect federal or state unemployment for at least 12 consecutive weeks, IRA withdrawals used to pay health insurance premiums for you, your spouse, or your dependents are penalty-free.² The exception closes once you have been reemployed for 60 days.¹

Education, First Home, and a New Child

Qualified higher education costs — tuition, fees, books, supplies, and room and board for at least half-time students — can be paid from an IRA penalty-free.² The student can be you, your spouse, your child, or your grandchild. The penalty-free amount is capped at the actual qualified expenses you paid during the calendar year.

For a first home, the cap is $10,000 over your lifetime, and the money can go toward buying, building, or rebuilding a main home for you, your spouse, a child, a grandchild, or a parent.³ “First-time” is a term of art here: it means the buyer has not owned a main home in the two years before the purchase date. You have 120 days to use the money, and if the purchase falls through you can roll the funds back to an IRA within that same 120-day window without burning your once-a-year rollover.¹

Within one year of a birth or the finalization of an adoption, you can withdraw up to $5,000 per child penalty-free.¹ An adopted child has to be under 18 or unable to support themselves. You can repay the distribution to an IRA within three years and have it treated as a tax-free rollover. The child’s name, age, and taxpayer identification number go on your return for the year of the withdrawal.

Reservists and IRS Levies

Reserve members called to active duty for more than 179 days can take penalty-free IRA distributions at any point during that active duty period, and they have a two-year window after active duty ends to put the money back.⁴

When the IRS itself levies your IRA to collect unpaid taxes, the resulting distribution is exempt from the 10% penalty.³ Income tax still applies, but you did not choose the withdrawal, so the penalty is waived.

Exceptions Added by SECURE 2.0

The SECURE 2.0 Act, enacted in late 2022, opened up several new penalty-free reasons to tap an IRA. Many account holders still do not know these exist.

Emergency Personal Expenses

Once a year, you can take up to $1,000 for an unforeseeable or immediate financial need without the 10% penalty.¹ If the balance is under $1,000, you can only take the amount above $1,000 in the account. You have three years to repay. Take a second emergency withdrawal before repaying the first, and you generally cannot use the exception again unless your contributions in the meantime match or exceed what you pulled out.

Domestic Abuse Survivors

A victim of domestic abuse by a spouse or domestic partner can withdraw the lesser of $10,000 (indexed for inflation in future years) or 50% of the account balance, penalty-free, within one year of the abuse.¹ You self-certify. As with birth or adoption, you have three years to repay.

Federally Declared Disasters

If you live in a FEMA-declared major disaster area and suffered an economic loss, you can take up to $22,000 in penalty-free distributions across all your retirement accounts combined.⁵ The distribution window opens on the first day of the incident period and runs 180 days past the latest of several trigger dates. You can spread the income over three tax years or repay within three years to undo the tax entirely.

Substantially Equal Periodic Payments

If none of the event-based exceptions fit and you still need income from your IRA before 59½, a series of substantially equal periodic payments (SEPPs) is the structured way through. You calculate a stream of withdrawals based on your life expectancy using one of three IRS-approved methods — the required minimum distribution method, the fixed amortization method, or the fixed annuitization method — and the 10% penalty is waived on each payment.⁶⁷

The catch is the lock-in. You must keep taking payments for five full years or until you reach 59½, whichever is later.⁶ Modify the payment amount or stop early, and the IRS applies the 10% penalty retroactively to every distribution you took under the plan, plus interest running from each year’s payment.⁷ A 45-year-old who starts one is committed for nearly 15 years.

The 60-Day Rollover as a Practical Escape

This isn’t a Section 72(t) exception, but it is the way many people sidestep the penalty in practice. Deposit the distribution into the same or another IRA within 60 days, and it counts as a rollover instead of a taxable distribution.⁸ No income tax, no penalty. You have to roll over the full distribution amount, or you owe tax on whatever you kept.

The catch: only one IRA-to-IRA rollover per 12-month period across all your IRAs combined.⁸ Trustee-to-trustee transfers between custodians do not count toward that limit and are generally safer.

How Roth IRA Withdrawals Differ

Every dollar you pull from a Roth IRA comes out through a fixed ordering: regular contributions first, then conversion amounts (oldest first, taxable portion before nontaxable), then earnings.⁹ Your original contributions are always tax-free and penalty-free at any age. The 10% penalty questions only start when you dig into converted amounts or earnings.

Two separate five-year rules apply. Withdraw the taxable portion of a Roth conversion within five years and before 59½, and you owe the 10% penalty on it; the clock starts January 1 of the conversion year and runs independently for each conversion.⁹ The standard 72(t) exceptions above will waive that penalty.

Earnings are the layer that can be hit with both income tax and the 10% penalty. To pull earnings free of both, the distribution has to be “qualified”: the Roth must have been open at least five tax years (measured from January 1 of the year of your first Roth contribution), and one of four events must apply — you are at least 59½, you are disabled, the distribution goes to a beneficiary after your death, or it goes to a first-time home purchase up to the $10,000 lifetime limit.⁹ Miss either condition, and income tax plus the 10% penalty land on the earnings portion.

Claiming the Exception on Your Tax Return

An exception you don’t file for is an exception you don’t get. Your IRA custodian sends you Form 1099-R for any distribution of $10 or more, and Box 7 carries a distribution code.¹⁰ Code 1 tells the IRS the distribution is potentially subject to the 10% penalty. Code 2 tells the IRS the custodian already knows an exception applies. Either way, sorting out the actual penalty is on you.

You report the distribution on Form 1040 and use Form 5329 to either pay the 10% additional tax or claim an exception.¹¹ Form 5329 uses numbered codes: 02 for substantially equal periodic payments, 03 for disability, 05 for medical expenses, 07 for health insurance while unemployed, 08 for education, 09 for first-time home purchase, 10 for an IRS levy, and 11 for qualified reservist distributions, among others. Enter the code that matches your situation next to the amount.

Skip Form 5329 when you have an exception to claim, and the IRS will read the Code 1 on your 1099-R, assume you owe the penalty, and assess it. Unwinding that after the fact takes correspondence you would rather avoid.

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 – Exceptions to Tax on Early Distributions
3
Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
4
Legal Information Institute. 26 USC 72 – Additional Tax on Early Distributions From Qualified Retirement Plans
5
Internal Revenue Service. Retirement Plans and IRAs Under the SECURE 2.0 Act of 2022
6
Internal Revenue Service. Substantially Equal Periodic Payments
7
Internal Revenue Service. Notice 2022-6 – Determination of Substantially Equal Periodic Payments
8
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
9
Internal Revenue Service. Publication 590-B (2025), Distributions From Individual Retirement Arrangements (IRAs)
10
Internal Revenue Service. About Form 1099-R
11
Internal Revenue Service. Instructions for Form 5329