Ordinarily, a 10 percent penalty must be paid if a taxpayer withdraws funds from an IRA or other retirement account before reaching age 59 1/2. But there are exceptions, and the SECURE Act 2.0 creates several new ones.

The Details

Starting in 2024, taxpayers may withdraw up to $1,000 from their retirement accounts without penalty in case of a financial emergency. This penalty exception applies to any taxpayer who needs the money "for purposes of meeting unforeseable or immediate financial needs relating to necessary personal or family emergency expenses."

Additionally, starting immediately, individuals who are terminally ill may withdraw any amount from their retirement accounts penalty-free. The tax law defines a "terminal illness" as any illness that is likely to result in death within a period of seven years.

Starting in 2024, individuals suffering domestic abuse from a spouse or domestic partner may withdraw up to $10,000 from retirement accounts penalty-free. 

Penalty-free withdrawals in the event of a federally declared disaster are made permanent, but the amount is reduced to $22,000.

Penalty-free withdrawals are also allowed to help pay for long-term care insurance and by public safety workers.

If you would like guidance on new tax provisions like this one, click here to schedule an appointment with one of Gold Standard's seasoned tax accountants.

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