Early distributions under the Age 59 1/2 Rule (early withdrawals) from
a regular IRA must be reported as part of Adjusted Gross Income and
are subject to a 10% tax in addition to the normal income tax, unless
the distributions fall into certain exceptions. In some cases (SIMPLE
retirement account), the distributions are subject to an additional
25% tax instead of the 10% tax.
and IRS Publication 590, Individual Retirement Arrangements
"Early Distributions. You must include early distributions of taxable
amounts from your traditional IRA in your gross income. Early
distributions are also subject to an additional 10% tax, as discussed
Early distributions defined.
Early distributions are amounts distributed from your traditional IRA
account or is the amount of excess contributions annuity before you
are age 59 1 /2 , or amounts you receive for previous years that you
can deduct when you cash in retirement bonds before you are age 59 1
/2 . Exceptions. In certain situations, you may not have to pay the
10% additional tax even if amounts are distributed from your IRA
before you are age 59 1 /2 . These situations are listed below.
You have unreimbursed medical expenses that are more than 7.5% of
your adjusted gross income. [*See below.]
The distributions are not more than the cost of your medical
You are disabled.
You are the beneficiary of a deceased IRA owner.
You are receiving distributions in the form of an annuity.
The distributions are not more than your qualified higher education
You use the distributions to buy, build, or rebuild a first home.
The distribution is due to an IRS levy of the qualified closed plan.
Most of these exceptions are explained earlier at Exceptions under Age
59 1 /2 Rule. q.v.
*Adjusted gross income. This is the amount on Form 1040, line 36 or
Form 1040A, line 22.
Note. Distributions that are timely and properly rolled over, as
discussed earlier, are not subject to either regular income tax or the
10% additional tax. Certain withdrawals of excess contributions are
also tax free and not subject to the 10% additional tax. (See Excess
Contributions Withdrawn by Due Date of Return, and Excess
Contributions Otherwise Withdrawn After Due Date of Return, earlier.)
This also applies to transfers incident to divorce, as discussed under
Can I Move Retirement Plan Assets, earlier. (q.v.)
Additional 10% tax. The additional tax on early distributions is 10%
of the amount of the early distribution that you must include in your
gross income. This tax is in addition to any regular income tax
resulting from including the distribution in income.
Use Form 5329 to figure the tax. See the discussion of Form 5329,
later, under Reporting Additional Taxes for information on filing the
Early distributions of funds from a SIMPLE retirement account made
within 2 years of beginning participation in the SIMPLE are subject to
a 25%, rather than 10%, early distributions tax.
Age 59 1 /2 Rule
Generally, if you are under age 59 1 /2 you must pay a 10% additional
tax on the distribution of any assets (money or other property) from
your traditional IRA. Distributions before you are age 59 1 /2 are
called early distributions.
The 10% additional tax applies to the part of the distribution that
you have to include in gross income. It is in addition to any regular
income tax on that amount.
Medical insurance. Even if you are under age 59 1 /2 , you may not
have to pay the 10% additional tax on distributions from your
traditional IRA during the year that are not more than the amount you
paid during the year for medical insurance for yourself, your spouse,
and your dependents. You will not have to pay the tax on these amounts
if all four of the following conditions apply.
1) You lost your job.
2) You received unemployment compensation paid under any federal or
state law for 12 consecutive weeks.
3) You receive the distributions during either the year you received
the unemployment compensation or the following year.
4) You receive the distributions no later than 60 days after you have
See Publication 590 for the details of the other exceptions and the
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