Besides the regular income tax levied on funds withdrawn from IRA accounts, early withdrawals are subject to a 10 percent penalty tax, reports the IRS. A number of circumstances qualify as exceptions to the 10 percent penalty.Continue Reading
Although account holders can withdraw and use IRA funds at any time, the early distribution tax applies to any withdrawals made before the age of 59 1/2, according to the IRS. Exceptions are made when the funds are used for higher education for the account holder or the account holder's family, the purchase of a first home, medical insurance while the account holder is unemployed or excessive medical bills, as reported by Bankrate. Account holders who become completely and permanently disabled are eligible for penalty-free early withdrawals. Reserve military personnel who are called to active duty for 180 days or more can take penalty-free IRA withdrawals.
Another method of avoiding penalties when tapping assets from IRA accounts early is by taking substantially equal periodic payments, states Kiplinger. The payments must continue for at least five years or until the account holder reaches 59 1/2, whichever is longer. However, once the payments are initiated, they must continue for as long as the terms are set up, and the account holder can take no other withdrawals without risking substantial penalties.Learn more about Taxes
The penalty for early withdrawal of funds from 401(k) accounts is 10 percent of the amount included in gross income in addition to regular income tax, reports the IRS. There are a number of exceptions to the 10 percent early withdrawal tax.Full Answer >
The early withdrawal taxes and penalties for a 401(k) cash out include standard income tax and a 10 percent penalty tax on the entire amount, reports the IRS. The 10 percent penalty tax is waived if the distribution qualifies as an exception.Full Answer >
The costs of an early withdrawal from a 401(k) retirement plan are a standard income tax and a 10 percent penalty tax on the entire amount withdrawn, reports the IRS. The 10 percent penalty tax is waived if the early distribution qualifies as an exception.Full Answer >
Those who take early withdrawals from 401(k) plans must pay a 10 percent penalty tax on the amount of the withdrawal as well as standard income tax, reports the IRS. However, there are a number of exceptions for which the penalty tax is waived.Full Answer >