If you are a victim of domestic abuse, our heart goes out to you.
There is an option to access up to $10,000 retirement money penalty free for domestic abuse survivors
We want to bring to your attention some good news when it comes to your financial situation. Starting with 2024 a domestic abuse survivor can withdraw up to $10,000 from their retirement account penalty free. This can help you or your loved one to escape an unsafe situation.
Normally, early distributions from retirement accounts, such as IRAs or 401K accounts, are subject to a 10% tax, in addition to the regular income tax. The amounts you withdraw from an IRA or retirement plan before you reach age 59½ are called “early” or “premature” distributions. On these distributions you must pay an additional 10% early withdrawal tax, unless an exception applies.
As a victim of domestic abuse, you can have these early distributions penalty free, up to $10,000, but not to exceed half of your retirement account.
Option for repayment and Refund of income tax
Additionally, if you take advantage of this new rule, you have the opportunity to repay the money you withdrew from your retirement plan over three years. And you will get a refund for the income taxes you paid on this money at the time of the distribution.
Requirements
To be able to do this, you will have to self-certify that you experienced domestic abuse. This means you do not need any further documentation such as law enforcement records or medical records. But you do need to take the distribution within 12 months of the domestic abuse incident.
This is a provision found in the Secure Act 2.0 of 2022, section 314, which is effective for distributions made after December 31st 2023.
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This material is for informational purposes only. It does not constitute tax, legal or accounting advice.