![]() ![]() How do I qualify for the first-time homebuyer early distribution penalty tax exception? ![]() Generally, to qualify, an individual’s disability must preclude her from engaging in gainful employment and must be of long-continued and indefinite duration or is expected to lead to death. To meet the disability exception, you must satisfy the definition of disability found in Internal Revenue Code (IRC) Sec. Under what circumstances does disability qualify as an exception to the early distribution penalty tax? Note, however, that if you are a spouse beneficiary and you roll over or transfer distributions from your deceased spouse’s IRA into your own IRA, subsequent distributions taken before age 59½ will be subject to the 10 percent early distribution penalty tax, unless you qualify for a penalty exception. Distributions made to IRA beneficiaries after the IRA owner’s death are exempt from the 10 percent early distribution penalty tax. If I am a beneficiary of an IRA under age 59½, am I subject to the 10 percent penalty tax for my IRA distributions? If you take a taxable IRA distribution before age 59½ and that distribution is subject to the 10 percent early distribution penalty tax, you may need to file IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, along with your federal tax return to report and pay the penalty taxes owed. How to I pay the early distribution penalty tax if I do not qualify for a penalty tax exception? ![]() Tax laws provide several exceptions to the federal penalty tax. IRA assets that represent after-tax dollars (e.g., nondeductible Traditional IRA contributions, Roth IRA contributions) are not taxed when distributed because these assets have already been taxed. IRA distributions generally are subject to income tax, and a 10 percent early distribution penalty tax applies if the IRA assets are distributed before the IRA owner turns age 59½, unless a penalty tax exception applies. Distributions Prior to Age 59-1/2 Are IRA distributions taken before age 59 ½ subject to additional tax? ![]()
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