Generally, an additional 10% tax applies to early distributions from tax-preferred retirement accounts unless an exception applies.

SECURE 2.0 Act Sec 115; adds new IRC Sec 72(t)(2)(I))) that provides an exception for certain distributions used for emergency expenses, which are unforeseeable or immediate financial needs relating to personal or family emergency expenses.

Only one distribution is permissible per year of up to $1,000, and a taxpayer has the option to repay the distribution within 3 years.

No further emergency distributions are permissible during the 3-year repayment period unless repayment occurs.

Effective Date: Applies to distributions made after December 31, 2023.