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See Publication 590 for more information

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 later.

Early distributions defined.   Early distributions generally are amounts distributed from your traditional IRA account or annuity before you are age 59½, or amounts you receive when you cash in retirement bonds before you are age 59½.

Generally, if you are under age 59½, 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 59½ 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.

A number of exceptions to this rule are discussed below under Exceptions. Also see Contributions Returned Before Due Date of Return , earlier.

You may have to pay a 25%, rather than a 10%, additional tax if you receive distributions from a SIMPLE IRA before you are age 59½. See Additional Tax on Early Distributions under When Can You Withdraw or Use Assets? in chapter 3.
After age 59½ and before age 70½.   After you reach age 59½, you can receive distributions without having to pay the 10% additional tax. Even though you can receive distributions after you reach age 59½, distributions are not required until you reach age 70½. See When Must You Withdraw Assets? (Required Minimum Distributions) , earlier.

Exceptions

There are several exceptions to the age 59½ rule. Even if you receive a distribution before you are age 59½, you may not have to pay the 10% additional tax if you are in one of the following situations.

  • You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.

  • The distributions are not more than the cost of your medical insurance.

  • 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 expenses.

  • You use the distributions to buy, build, or rebuild a first home.

  • The distribution is due to an IRS levy of the qualified plan.

  • The distribution is a qualified reservist distribution.

Most of these exceptions are explained below.

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 after the due date of your return are also tax free and therefore not subject to the 10% additional tax. (See Excess Contributions Withdrawn After Due Date of Return , earlier.) This also applies to transfers incident to divorce, as discussed earlier under Can You Move Retirement Plan Assets .

Receivership distributions.   Early distributions (with or without your consent) from savings institutions placed in receivership are subject to this tax unless one of the above exceptions applies. This is true even if the distribution is from a receiver that is a state agency.

Unreimbursed medical expenses.   Even if you are under age 59½, you do not have to pay the 10% additional tax on distributions that are not more than:

  • The amount you paid for unreimbursed medical expenses during the year of the distribution, minus

  • 7.5% of your adjusted gross income (defined later) for the year of the distribution.

You can only take into account unreimbursed medical expenses that you would be able to include in figuring a deduction for medical expenses on Schedule A, Form 1040. You do not have to itemize your deductions to take advantage of this exception to the 10% additional tax.

Adjusted gross income.   This is the amount on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 36.

Medical insurance.   Even if you are under age 59½, you may not have to pay the 10% additional tax on distributions 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 of the following conditions apply.

  • You lost your job.

  • You received unemployment compensation paid under any federal or state law for 12 consecutive weeks because you lost your job.

  • You receive the distributions during either the year you received the unemployment compensation or the following year.

  • You receive the distributions no later than 60 days after you have been reemployed.

Disabled.   If you become disabled before you reach age 59½, any distributions from your traditional IRA because of your disability are not subject to the 10% additional tax.

  You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.

Beneficiary.   If you die before reaching age 59½, the assets in your traditional IRA can be distributed to your beneficiary or to your estate without either having to pay the 10% additional tax.

  However, if you inherit a traditional IRA from your deceased spouse and elect to treat it as your own (as discussed under What if You Inherit an IRA , earlier), any distribution you later receive before you reach age 59½ may be subject to the 10% additional tax.