Penalty-Free IRA (and Trump Accounts) Withdrawals Before Age 59½

With the passage of the One Big Beautiful Bill (OBBB) in July 2025, Trump Accounts were born. For the benefit of children under the age of 18, these accounts are tax-deferred investment vehicles.

Initially drafted by legislators for tax-advantaged use in paying for education, first-time home purchases, and small business startups, the final version of the OBBB wound up scrapping the income tax benefits of Trump Accounts’ for these specific purposes.

Trump Accounts as enacted and coming to families in 2026 are taxed like regular IRAs.

Before age 59 ½ funds withdrawn from an IRA (and now Trump Accounts) are generally subject to ordinary income tax and, with certain exceptions, a 10% IRS penalty.

My interest in the Trump Accounts features caused me to remind myself exactly what are those exceptions that avoid paying the IRS a 10% penalty for an early withdrawal from an IRA (and now also Trump Accounts)?

Penalty-Free IRA (and Trump Accounts) Withdrawal Exceptions (Before Age 59½)

1. Post-Secondary Education Expenses

You can withdraw funds penalty-free to pay for certain qualified education expenses (tuition, books, room and board (if eligible) and computers) for yourself, your spouse, children, or grandchildren.

2. First-Time Home Purchase

You may be able to withdraw up to $10,000 lifetime from your IRA to buy, build, or rebuild a first home.

3. Unreimbursed Medical Expenses

If your unreimbursed medical costs for the year exceed 7.5% of your adjusted gross income (AGI), you may be able to withdraw that amount without penalty.

4. Health Insurance Premiums While Unemployed

If you’ve been unemployed for at least 12 consecutive weeks and received unemployment compensation, you may be able to use IRA funds to pay health insurance premiums for immediate family.

5. Permanent Disability

If you become permanently and totally disabled, under physician’s orders, you may be able to take distributions at any age without the 10% penalty.

6. IRS Levy

If the IRS levies your IRA to collect back taxes, you may not owe the 10% penalty on the levied amount.

7. Qualified Military Reservists

If you’re called to active duty for 180 days or more (or indefinitely), you may be able to take penalty-free withdrawals for a period of time.

8. Qualified Disaster Relief

Up to $22,000 (as adjusted from time to time) for federally declared disasters.

9. Substantially Equal Periodic Payments (SEPP)

You may be able to set up a series of fixed, regular withdrawals based on IRS life expectancy tables under certain limited circumstances.

In Conclusion

While IRAs (and now Trump Accounts) are designed for retirement, there are legitimate and penalty-free reasons to access your retirement funds early.

This article is intended to be a short summary of available categories of penalty-free withdrawals, and a closer-look at the “fine print” of the qualifications is warranted before taking any action!

Educational purposes, not tax or legal advice. Consult your personal advisors before taking any action. Not updated for law changes.

By: Elyse W. Germack, Attorney and CPA