I.R.C. Section 72(t) Excise Tax on Early Distributions
Under I.R.C. §72(t) taxable distributions from qualified retirement plans (including IRAs) made to participants before age 59½ are subject to a 10% federal excise tax, with certain exceptions.
Distributions are not subject to the 10% excise tax if made on account of:
- A distribution in the form of a series of substantially equal periodic payments for life;
- Separation from service on or after attainment of age 55;
- Medical expenses that exceed 7.5% (10% for individuals less than age 65) OR to pay health insurance premiums if the taxpayer has received unemployment compensation for at least 12 weeks;
- A distribution pursuant to a qualified domestic relations order;
- A qualified reservist distribution from an IRA or from amounts attributable to elective deferrals under §401(k) plans, §403(b) arrangements or §501(c)(18) trusts;
- Higher education expenses; or
- A first time home purchase.
Call us at 440-617-6697 if you would like to discuss tax strategies regarding early distributions from your qualified plans.