Rule of 55
No 10% penalty
Can You Write Off Rule of 55?
Short answer: Leave your job in or after the year you turn 55 and that employer's 401(k) withdrawals skip the 10% penalty; IRAs don't qualify.
Withdrawals before 59½ are taxed as income plus a 10% penalty unless an exception applies; exceptions waive the penalty, not the income tax.
Records to keep: Keep receipts, statements (1098, 1098-T, 1099, W-2G), and a note of what each cost was for. Compare itemizing to the 2026 standard deduction before you claim.
Rule of 55
No 10% penalty
Individuals / Personal Taxes
Leave your job in or after the year you turn 55 and that employer's 401(k) withdrawals skip the 10% penalty; IRAs don't qualify.
Business justification
Leave your job in or after the year you turn 55 and that employer's 401(k) withdrawals skip the 10% penalty; IRAs don't qualify. Withdrawals before 59½ are taxed as income plus a 10% penalty unless an exception applies; exceptions waive the penalty, not the income tax.
Category
- Personal Tax Deductions