Question

Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA: a. Using the withdrawals for medical expenses in excess of 7.5 percent of their AGI, for persons younger than 59½ years old b. Paying the costs of higher education, including tuition, fees, books, and room and board for a dependent child c. Withdrawing up to $30,000 of first-time home-buying expenses d. Over 59½ years old

Answer 1

Solution

Option C is the correct Answer.

Option a, b and d are the are the exceptions to the 10% early withdrawal penalty of a traditional IRA.

In the case First time home buyer the criteria for exceptions to the 10% early withdrawal penalty of a traditional IRA are as follows :-

If you qualify as a first-time home buyer, you can withdraw up to $10,000 from your IRA to use as a down payment (or to help build a home) without having to pay the 10% early withdrawal penalty. However, you'll still have to pay regular income tax on the withdrawal.

Hence, in the given case withdrawing upto $30000 first time home buying expenses is not an exception to the 10% early withdrawal penalty of a traditional IRA .