There are some special times when you can take money out of your individual retirement account (IRA), and not pay the 10% tax penalty if you are under 59 1/2 years old. You will still pay taxes at your regular federal rate, but no penalty.-
Here are the ways in which you can withdraw funds without penalty
You are buying your first home. You can take out up to $10,000 to help pay for the house. “First-time home buyer” has an elastic definition. It means you haven’t owned a home in the past two years. You can take out a total of $10,000 during your lifetime. You and your spouse can each take $10,000.
You lost your job and you have been receiving unemployment insurance payments for 12 weeks in a row. You can get the money in the year you lost your job or in the next year. But if you get a new job, you have to receive the IRA funds no later than 60 days after starting on the new job.
You become disabled. This requires the same standard as Social Security disability. A doctor has to certify that you are unable to work.
You can take out money to pay for education costs, including tuition, room and board, books. This can be used by yourself, spouse, children or grandchildren. But remember that an IRA distribution given as a gift to your grandchild is counted as income when a student files for financial aid. It might reduce any scholarship aid she receives.
You can pay for medical bills that are not reimbursed by insurance, and are in excess of 7.5% of your adjusted gross income Suppose Jean has an income of $70,000, and medical bills of $12,000 that weren’t covered by her health policy at work. She can deduct $6,750 on her federal income taxes. She doesn’t have to itemize deductions to take this particular deduction.
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