List of 72t Exceptions to the 10% Tax
The table below is a quick view of all 72t exceptions to the 10% tax. You can read the text of the code at the Cornell Legal Information Institute site:
https://www.law.cornell.edu/uscode/text/26/72.
72(t) 10-percent additional tax on early distributions from qualified retirement plans | |
(1) Imposition of additional tax | If any taxpayer receives any amount from a qualified retirement plan (as defined in section 4974(c)), the taxpayer’s tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income. |
(2) Subsection not to apply to certain distributions | Except as provided in paragraphs (3) and (4), paragraph (1) shall not apply to any of the following distributions: |
(A) In general Distributions which are— | |
(i) Age 59 1/2 | made on or after the date on which the employee attains age 59½, |
(ii) Death | made to a beneficiary (or to the estate of the employee) on or after the death of the employee, |
(iii) Disability | attributable to the employee’s being disabled within the meaning of subsection (m)(7), |
(iv) SEPP | part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary, |
(v) Age 55 (Qualified Retirement Plans only) | made to an employee after separation from service after attainment of age 55, [in other words, the employee can use this exception if s/he separated from service during the year s/he turned 55, or anytime thereafter] |
(vi) Dividends (ESOP only) | dividends paid with respect to stock of a corporation which are described in section 404(k), |
(vii) Levy | made on account of a levy under section 6331 on the qualified retirement plan, or |
(viii) Annuity | payments under a phased retirement annuity under section 8366a(a)(5) [3] or 8412a(a)(5) of title 5, United States Code, or a composite retirement annuity under section 8366a(a)(1) [3] or 8412a(a)(1) of such title. |
(B) Medical expenses | Distributions made to the employee (other than distributions described in subparagraph (A), (C), or (D)) to the extent such distributions do not exceed the amount allowable as a deduction under section 213 to the employee for amounts paid during the taxable year for medical care (determined without regard to whether the employee itemizes deductions for such taxable year). |
(C) Divorce or QDRO | Any distribution to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)(1)). |
(D) Health Insurance premiums | If such individual has received unemployment compensation... |
(E) Higher Education expenses | Distributions to an individual from an individual retirement plan to the extent such distributions do not exceed the qualified higher education expenses (as defined in paragraph (7)) of the taxpayer for the taxable year. Distributions shall not be taken into account under the preceding sentence if such distributions are described in subparagraph (A), (C), or (D) or to the extent paragraph (1) does not apply to such distributions by reason of subparagraph (B). |
(F) First Home purchases | Distributions to an individual from an individual retirement plan which are qualified first-time homebuyer distributions (as defined in paragraph (8)). Distributions shall not be taken into account under the preceding sentence if such distributions are described in subparagraph (A), (C), (D), or (E) or to the extent paragraph (1) does not apply to such distributions by reason of subparagraph (B). |
(G) Individuals called to active duty | |
(9) Deferred Compensation Plans (Section 457 plans) | For purposes of this subsection, a distribution from an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A) shall be treated as a distribution from a qualified retirement plan described in 4974(c)(1) to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan (as defined in section 4974(c)). |
(10) Public Safety Employees in governmental plans | In the case of a distribution to a qualified public safety employee from a governmental plan (within the meaning of section 414(d)), paragraph (2)(A)(v) shall be applied by substituting “age 50” for “age 55”. |