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Form 5329
Form 5329

Form 5329Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts

3 — Amount Subject to Additional Tax Updated for tax year 2025

Does this apply to you?

  • You took early distributions and only part of the amount qualifies for an exception
  • You have no qualifying exception and the full early distribution is subject to the penalty
  • You need to calculate the base amount for the 10% additional tax on line 4

Easy to overlook

Partial exceptions are common You can have $30,000 in early distributions where $10,000 qualifies for the first-time homebuyer exception and $20,000 does not qualify for any exception. Line 2 is $10,000, and line 3 is $20,000. The 10% penalty applies only to the $20,000. Filers sometimes assume it is all-or-nothing — either the entire distribution is exempt or none of it is. 1 IRS Form 5329 instructions — Line 3

Distributions used for qualified higher education expenses are penalty-free from IRAs Early IRA distributions used to pay qualified education expenses (tuition, fees, books, supplies) for you, your spouse, or dependents are exempt from the 10% penalty. This exception applies only to IRAs, not to 401(k) or 403(b) plans. Filers who paid college expenses with IRA withdrawals often miss this exception and overpay on line 3. 2 IRS Publication 590-B — Distributions from IRAs

Watch out for this

Entering the full distribution amount on line 3 without first checking all available exceptions on line 2. The IRS provides over a dozen exception codes. Review every code before concluding that no exception applies. A $10,000 distribution with a valid exception means zero on line 3 and no penalty. Skipping line 2 costs you 10% unnecessarily.

Footnotes

  1. IRS Form 5329 Instructions, Line 3. https://www.irs.gov/instructions/i5329

  2. IRS Publication 590-B, Distributions from Individual Retirement Arrangements, Exceptions. https://www.irs.gov/pub/irs-pdf/p590b.pdf

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