What are the exceptions to the early IRA withdrawal penalty in 2025?

Withdrawals from a traditional IRA before age 59 1/2 are generally subject to a 10% early withdrawal penalty (in addition to ordinary income tax). However, numerous exceptions exist under IRC Section 72(t).

Penalty-free exceptions for IRAs:

• First-time home purchase: Up to $10,000 lifetime (per individual) for buying, building, or rebuilding a first home. Both spouses can use $10,000 each from their own IRAs.
• Higher education expenses: Tuition, fees, books, supplies, and room and board for you, your spouse, children, or grandchildren at an eligible institution.
• Unreimbursed medical expenses: Amounts exceeding 7.5% of your AGI.
• Health insurance premiums while unemployed: If you received unemployment compensation for 12+ consecutive weeks.
• Disability: Must be a total and permanent disability as defined by IRC Section 72(m)(7).
• Substantially Equal Periodic Payments (SEPP/72(t)): A series of substantially equal payments over your life expectancy. Must continue for 5 years or until age 59 1/2, whichever is later.
• IRS levy: Amounts withdrawn to pay an IRS levy.
• Qualified birth or adoption: Up to $5,000 per parent within one year of birth or adoption finalization (added by SECURE Act).
• Domestic abuse victim: Up to $10,000 (indexed for inflation) within one year of abuse (added by SECURE Act 2.0).
• Terminal illness: Distributions to terminally ill individuals (added by SECURE Act 2.0).
• Emergency expenses: Up to $1,000 per year for unforeseeable personal emergencies (SECURE Act 2.0, starting 2024).

Roth IRA note: Roth IRA contributions (not earnings) can always be withdrawn tax and penalty-free at any time. The penalty and income tax only apply to earnings withdrawn before age 59 1/2 and before the account has been open 5 years.