If the individual wishing to withdraw from an IRA is under the age of 59 1/2 and does not want to face a 10 percent tax penalty, the withdrawal must go toward a major expense, such as college tuition, says CNN Money. The individual can also withdraw a former contribution.Know More
One major expense is college, which does include the tuition of the individual but can extend to the tuition costs of his spouse, children or grandchildren, according to CNN Money. The money from the withdrawal can also be used for outstanding medical bills that total more than 7.5 percent of his adjusted gross income or toward a loan of no higher than $10,000 for a down-payment on his first home, as of 2015. The penalty may also be waived if the individual withdrawing from the IRA is withdrawing as the result of a sudden disability.
Individuals who have contributed toward an IRA can withdraw the contribution on a one-time basis, claims CNN Money. However, the penalty is waived only if he withdraws before the tax filing deadline and does not include it as a deduction.
The final way an individual can avoid paying a penalty on the withdrawal from an IRA is by rolling the money into a similar retirement fund, says CNN Money. However, the rollover must occur within 60 days of the initial withdrawal, and the money cannot be used to pay for outstanding expenses.Learn more about Financial Planning
When a person younger than 59 and a half withdraws money from an individual retirement arrangement, or IRA, there may be a 10 percent tax on the distributions that are part of the person's gross income during the year of withdrawal, notes the Internal Revenue Service. The person will not have to pay the tax if the money is being transferred to a different IRA account or if he qualifies for several other exceptions.Full Answer >
IRA plan owners must pay a 10 percent penalty tax in addition to standard income tax when they take early withdrawals from their plans, explains the Internal Revenue Service. However, if the withdrawal qualifies as an exception, the penalty tax is waived.Full Answer >
Account holders calculate taxes and penalties for early withdrawals from traditional IRA accounts by adding standard income tax plus a 10 percent penalty tax for the amount of the withdrawal, reports the IRS. The 10 percent penalty tax is waived if the withdrawal qualifies as an exception.Full Answer >
Account holders can withdraw money from Simple IRAs at any time, but if they are under 59 1/2 years old, the distribution is subject to a penalty tax of 10 percent or more, reports the IRS. Account holders who turn 70 1/2 must initiate required minimum distributions or face penalties.Full Answer >