IRA Early Withdrawal Penalty Exceptions: The Complete 72(t) Reference Table

Taking money from an IRA before you turn 59½ normally triggers both ordinary income tax on the amount withdrawn and an additional 10% penalty tax under Internal Revenue Code Section 72(t). That second hit can cost thousands of dollars and is almost never recoverable.

Congress carved out a specific list of situations where the 10% penalty does not apply. Knowing which exceptions exist, which ones cover IRAs specifically, and what documentation each requires can help you make an informed decision. This reference covers every current exception, including four new provisions added by the SECURE 2.0 Act, signed into law on December 29, 2022.

For a broader look at the penalty itself, see our guide to gold IRA early withdrawal penalties. For a deep dive on the SEPP exception, see substantially equal periodic payments for gold IRAs.

The complete reference table

The table below lists every exception in the current law, including SECURE 2.0 additions effective as of 2024. The “IRA” column indicates whether the exception applies to traditional and Roth IRAs. The “Employer Plan” column covers 401(k), 403(b), and 457(b) plans. Study the distinction carefully: an exception available in your former employer’s plan does not automatically apply once you roll those funds into an IRA.

Sources: IRS Publication 590-B; IRS Form 5329 and Instructions; SECURE 2.0 Act of 2022, Pub. L. 117-328. Verify current-year details with a tax professional, as thresholds and form codes are updated periodically by the IRS.

One exception that does not appear in the table above: the age 55 separation-from-service rule under IRC 72(t)(2)(A)(v). That exception covers distributions from a 401(k) or similar employer plan after you leave the job in or after the year you turn 55. It does not apply to IRA accounts. The section below covers this common point of confusion in detail.

Each exception explained

Death

When an IRA owner dies, any distribution paid to a beneficiary or estate is not subject to the 10% additional tax, regardless of the beneficiary’s age. Income tax on the taxable portion still applies to the recipient unless the IRA is a Roth and the account has met the five-year holding rule. Beneficiary inherited IRA rules under the SECURE Act (2019) introduced the ten-year rule for most non-spouse beneficiaries, but the penalty exemption for distributions remains intact.

Total and permanent disability

The IRS definition under IRC 72(m)(7) is specific: you must be unable to engage in any substantial gainful activity because of a physical or mental condition that a physician certifies is expected to be of long, continued, and indefinite duration, or to result in death. The standard is stricter than some state disability definitions. Documentation from your physician and, often, supporting records from Social Security if you receive disability benefits, strengthens the claim.

Substantially equal periodic payments (SEPP)

This exception, sometimes called a 72(t) plan or SEPP arrangement, lets you take a series of substantially equal periodic payments from an IRA based on your life expectancy. Payments must continue for at least five years or until you reach age 59½, whichever is later. If you modify or stop the payments before the commitment period ends, a retroactive 10% penalty plus interest is assessed on all prior distributions. Three IRS-approved calculation methods exist: the required minimum distribution method, the fixed amortization method, and the fixed annuitization method. IRS Notice 2022-6 updated the guidance on these methods and should be read alongside the earlier guidance in IRS Publication 590-B. See our full guide on substantially equal periodic payments for gold IRAs for worked examples and commitment-period pitfalls.

Unreimbursed medical expenses

Distributions are penalty-free to the extent they cover unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI) for the year. The expense must be deductible under IRC 213 (whether or not you actually itemize). The distribution does not have to occur in the same year as the expense, but the expenses must be paid in the distribution year. Keep receipts and an explanation of benefits from your insurer to document what was and was not reimbursed.

Health insurance premiums while unemployed

This IRA-specific exception (not available for employer plans) covers health insurance premiums paid while you are receiving unemployment compensation. Requirements: you must have received unemployment compensation paid under federal or state law for 12 consecutive weeks; the distributions must occur in the year you received unemployment compensation or the following year; and the distributions cannot exceed the amount paid for health insurance for you, your spouse, and dependents. The exception ends 60 days after you return to employment.

Qualified higher education expenses

Distributions used to pay qualified higher education expenses for you, your spouse, your children, or your grandchildren avoid the 10% penalty. Qualifying expenses include tuition, fees, books, supplies, and equipment required for enrollment, plus room and board if the student is at least a half-time student. The institution must be an eligible educational institution under Section 25A. This exception applies to IRAs and is not available for 401(k) or similar employer plan distributions.

First home purchase

A first-time homebuyer can withdraw up to $10,000 from an IRA penalty-free, once in a lifetime. The IRS definition of “first-time” is broader than it sounds: you qualify if you (and, if married, your spouse) have not owned a principal residence in the two years before the acquisition date. The funds must be used to buy, build, or rebuild a qualifying home. If a delay occurs and the home purchase falls through, you generally have 120 days to roll the funds back into an IRA to avoid tax on the distribution. This exception is IRA-only and is not available for employer plan distributions.

IRS levy

When the IRS places a levy directly on your IRA account to satisfy a tax debt, the resulting distribution is exempt from the 10% penalty. The levy itself is the qualifying event. Voluntary payments to the IRS to avoid a levy do not qualify.

Qualified reservist distribution

Active duty military reservists and National Guard members ordered or called to active duty for more than 179 days (or an indefinite period) may take penalty-free IRA distributions during the period of active duty. The amount is limited to IRA contributions made during the two-year period ending on the date of the order. Repayment of these distributions to an IRA is permitted within two years after the active duty period ends.

Qualified birth or adoption

Added by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 and effective for distributions after December 31, 2019, this exception allows up to $5,000 per birth or adoption event, per individual. For a couple, each spouse’s IRA can contribute $5,000 separately ($10,000 combined for the same child). The distribution must occur in the one-year period beginning on the date of birth or the date the legal adoption is finalized. These funds can be repaid to the IRA at a later date.

SECURE 2.0 Act additions (2022 to 2024)

The SECURE 2.0 Act of 2022 added four new exceptions. Three became effective in 2024. One applied retroactively to disasters occurring on or after January 26, 2021.

Terminal illness

Effective for distributions on or after December 29, 2022 (the date SECURE 2.0 was signed), this exception covers individuals who have been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 84 months (seven years). There is no dollar cap. The distribution can be repaid to the IRA within three years, similar to the CARES Act treatment. This exception covers both IRAs and employer plans.

Emergency personal expense

Effective for distributions after December 31, 2023, this new exception allows up to $1,000 per calendar year for an unforeseeable or immediate financial need related to personal or family emergency expenses. Only one emergency distribution per calendar year is permitted. If the $1,000 is not repaid within three years, no additional emergency distributions can be taken during that period. This exception applies to both IRAs and employer plans.

Domestic abuse victim

Effective for distributions after December 31, 2023, this exception applies to an individual who self-certifies that they are a victim of domestic abuse by a spouse or domestic partner during the one-year period ending on the distribution date. The penalty-free amount is the lesser of $10,000 (indexed for inflation after 2024) or 50% of the vested account balance. The distribution can be repaid within three years. The IRS does not require third-party verification at the time of distribution, but self-certification is signed under penalty of perjury. This exception applies to both IRAs and employer plans.

Federally declared disaster

Effective for qualified disasters occurring on or after January 26, 2021, this exception allows up to $22,000 per disaster for individuals whose principal residence is in a federally declared disaster area and who sustain an economic loss from the disaster. The $22,000 can be spread over three years for income tax purposes. Repayment to an IRA within three years of the distribution date is permitted. This provision applies to both IRAs and employer plans and is accessed through the Form 8915 series (the applicable form number depends on the disaster year).

The exception that does not apply to IRAs: age 55 separation from service

IRC 72(t)(2)(A)(v) provides an exception for employees who separate from service in or after the year they turn 55 and take distributions from that employer’s plan. This covers 401(k) and 403(b) plans. Public safety employees of state and local governments who separate in or after the year they turn 50 qualify under a parallel rule.

The critical point: this exception disappears the moment you roll the employer plan funds into an IRA. Once the money moves to an IRA, the only age threshold that matters is 59½. Someone who retires at 57, rolls their 401(k) into a gold IRA, and then needs cash before age 59½ is not covered by the age 55 rule. The roll-then-withdraw strategy is a common and expensive mistake.

If early access before 59½ is a realistic need, consider leaving some or all employer plan funds in the plan rather than rolling them to an IRA, at least until you reach 59½. Then weigh the SEPP option if you need IRA funds regardless.

Gold IRA specifics: in-kind distributions and FMV

A gold IRA holds physical metals, not cash. When you take a distribution, you have two options: instruct the custodian to sell the metals and send you cash (the most common approach), or request an in-kind distribution where the physical coins or bars are shipped to you directly.

For an in-kind distribution, the taxable amount and the base for the 10% penalty calculation is the fair market value (FMV) of the metals on the distribution date, as determined by your custodian. Most custodians use a spot price reference (such as the London Bullion Market Association afternoon fix or the COMEX settlement price) for that specific date. Your Form 1099-R will show the FMV as the gross distribution amount.

If you qualify for one of the exceptions listed above, the 10% penalty does not apply to that FMV amount, but ordinary income tax on the distribution still applies for a traditional gold IRA. For a Roth gold IRA, penalty-free does not necessarily mean tax-free: earnings withdrawn before age 59½ and before the five-year holding period may still be taxable even if an exception applies. The rules interplay in ways that require case-by-case analysis.

For an illustrative example: if you take an in-kind distribution of one troy ounce of gold and the spot price on that date is $2,800, your custodian records a gross distribution of $2,800. If the birth-or-adoption exception applies and you contributed $2,800 to the IRA as an after-tax (nondeductible) contribution, the taxable amount may be reduced using your IRA basis tracked on Form 8606. The numbers in this example are illustrative only. Actual tax consequences depend on individual circumstances.

Claiming an exception on Form 5329

When your IRA custodian issues a Form 1099-R and Box 2b is checked (taxable amount not determined) or the distribution code in Box 7 does not already reflect an applicable exception, you must file Form 5329 (Additional Taxes on Qualified Plans) with your federal tax return.

Form 5329, Part I, asks for the amount of early distributions and the applicable exception code. The IRS updates exception codes periodically, and the codes for SECURE 2.0 additions may not yet appear on older versions of the form. Always use the version of Form 5329 for the tax year in which the distribution occurred, and confirm the applicable code in the form’s instructions for that year.

If the custodian codes the distribution correctly on the 1099-R (for example, using distribution code 2 for a known exception), you may not need to file Form 5329 separately. When in doubt, attach Form 5329 and show your work. The IRS can assess the 10% additional tax automatically based on the 1099-R if the exception is not documented.

Keep all supporting documentation for at least seven years: physician letters, military orders, unemployment compensation records, closing documents for a home purchase, birth certificates or adoption decrees, and any disaster-area documentation. The IRS routinely sends CP2000 notices questioning early distributions.

This information is educational and does not constitute tax or legal advice. Tax law changes frequently, and individual circumstances vary. Consult a qualified tax advisor for guidance specific to your situation before taking any early IRA distribution. Consult a licensed financial advisor before making retirement account decisions.