As a CPA who skis, I frequently get requests for free tax advice when I ride the ski lift with a stranger. Here’s one question I received last winter: “I have a daughter starting college next fall. Would it be better to take out a loan or to take money out of my IRA?”

Fortunately for that gentleman, taking money out of an IRA to pay college expenses for his daughter is one of the exceptions to the 10 percent penalty on early withdrawals from an IRA.

If your clients have a traditional IRA and are under the age of 59 ½, in addition to including the withdrawn amount in taxable income, they will be subject to a 10 percent penalty on the amount they withdraw unless they meet one of nine exceptions.

For Roth IRAs, clients can withdraw any amount of their contributions at any time. Once the account has been open for at least five years, withdrawals of the contributions and earnings are nontaxable and penalty-free if one of these situations applies: the account owner is at least 59 ½, disabled or deceased, or to purchase a first home.

If none of these situations applies and the Roth IRA meets the five-year rule, your clients will owe tax on any of the account earnings they withdraw from their Roth IRA. In addition, unless they meet one of the nine exceptions, they’ll also owe a 10 percent penalty on the taxable portion.

Here are the nine exceptions to early withdrawal penalties. These apply to traditional and Roth IRAs.

1. Higher education costs. Withdrawals to pay for tuition, fees, books and required supplies for your clients, their spouses, children and grandchildren qualify. If the student is enrolled at least half-time, withdrawals to pay for room and board also qualify.
2. First-time home purchase. Up to $10,000 per person or $20,000 for a couple can be withdrawn to apply toward the purchase of a home for your clients, their spouses, children, grandchildren or parents. As long as the buyer has not owned a home in the previous two years, this counts as a first-time home purchase. The money must be applied within 120 days of withdrawal or it will be subject to the ten percent penalty.
3. Medical expenses. If your clients have unreimbursed medical expenses, money from an IRA can be used to pay a portion of those expenses. The penalty-free amount is the amount of medical expenses exceeding 7.5 percent of their AGI. For example, Laurie has AGI of $100,000 and medical bills of $23,000. Since 7.5 percent of her income is $7,500, she can withdraw $15,500 from her IRA penalty-free ($23,000 – $7,500). Advisors should caution their clients that the IRS has challenged this when the taxpayer has other funds that could have been used instead.
4. Health insurance. If your clients are unemployed and have been collecting unemployment benefits for at least 12 weeks, IRA funds can be used to pay for health insurance. The health insurance premiums can be for your clients, their spouses and any dependents. 
5. Disability. If your clients are physically or mentally disabled and cannot participate in gainful employment, IRA withdrawals prior to age 59 ½ will be exempt from the penalty. Your clients will need corroboration from a physician that the condition is expected to either result in death or is of an uncertain duration. 
6. Death. If the IRA owner passes away before reaching age 59 ½, the beneficiary has three choices: take a lump-sum distribution, withdraw the funds within five years or roll the inherited IRA into a new IRA account. The 10 percent penalty won’t apply in this case. Be aware that inherited IRAs require careful planning to avoid tax surprises. 
7. Annuity. If your clients set up a series of annual payments over their life expectancy, those payments will be exempt from the penalty. Determining the amounts of the annual payments can be complex, so make sure your clients work with you to determine the best method and withdraw the correct amount every year.
8. Military reserve. Members of a branch of the military reserve who are called to active duty for a period greater than 179 days or for an indefinite period can take distributions penalty-free. 
9. IRS levy. Distributions made to satisfy an IRS levy are not subject to the penalty.

Solidify your role as your clients’ trusted advisor and pass along these exceptions to them. While IRAs may seem prohibitive to touch, the nine exceptions certainly make it possible.