Penalty Exception for IRA Distributions for Birth or Adoption Costs
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Penalty Exception for IRA Distributions for Birth or Adoption Costs
Starting in 2020, taxpayers who are having a baby or adopting can take a distribution from an IRA or 401(k) of up to $5,000 per individual ($10,000 for married couples), without having to pay the 10% early distribution penalty for pre-age 59 ½ withdrawals. The expense must have been incurred in the past twelve months. There is no specification that the expenses must be incurred after December 31, 2019; the legislation only specifies that the relief from the 10% penalty tax applies after that date for distributions made due to birth or adoption.
This change, effective January 1, 2020, is one of the many provisions in the SECURE Act that may affect you. For a description of some additional provisions in the SECURE Act, please visit our website.