Form 5329 Line 2 Exception Numbers 01-24 for 2026, Explained
The full list of Form 5329 line 2 exception numbers 01-24 from the 2026 draft instructions, new number 24, number 12 for a wrong code 1, and when 99 applies.
A common way to meet Form 5329 is the unfriendly one: a 1099-R arrives with a code in box 7a, the tax software asks for an “exception number,” and the only thing on screen is a drop-down menu with terse labels. The IRS’s own instructions explain each number, but the explanation is buried in a PDF, and the 2026 draft has changed. This guide walks through the list the way it will appear on your 2026 return, using the early release draft instructions dated November 6, 2026. Draft instructions can still change before final release, so treat the wording below as the current text rather than the last word.
What line 2 actually does
Part I of Form 5329 starts with the amount of early distributions you included in income on line 1. An early distribution, in the instructions’ words, is “any distribution from your IRA, other qualified retirement plan, or modified endowment contract before you reach age 59½.” That amount is generally subject to the 10% additional tax, but line 2 lets you exclude the part covered by an exception. The instruction for the line reads: “Enter on line 2 the amount that you can exclude. In the space provided, enter the applicable exception number (01–24). If more than one exception applies, enter 99.”
The rest is subtraction. Line 3 is what remains after line 2, and the tax is 10% of that. If any of the amount on line 3 came from a SIMPLE IRA within two years of first participating, the multiplier is 25% instead, and those distributions are marked with code S in box 7a. For the missed-withdrawal side of the same form, see our guide to the Form 5329 penalty for a missed RMD, which covers a different part of the document.
The 2026 list of exception numbers, in plain English
The table below reproduces each number from the draft instructions. Where the IRS text is long, I shortened it and marked each cut with an ellipsis. The last column flags the numbers the instructions limit to IRAs or exclude for IRAs.
| No. | Exception (IRS wording) | IRA note in the text |
|---|---|---|
| 01 | Qualified retirement plan distributions (doesn’t apply to IRAs) you received after separation from service when the separation from service occurs in or after the year you reach age 55 (age 50 for qualified public safety employees and private sector firefighters) or 25 years of service under the plan, whichever is earlier. | Excludes IRAs |
| 02 | Distributions made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives … of you and your designated beneficiary … | — |
| 03 | Distributions due to total and permanent disability. You are considered disabled if you can furnish proof that you can’t do any substantial gainful activity … | — |
| 04 | Distributions due to death (doesn’t apply to modified endowment contracts). | — |
| 05 | Qualified retirement plan distributions up to the amount you paid for unreimbursed medical expenses during the year minus 7.5% of your adjusted gross income (AGI) for the year. | — |
| 06 | Qualified retirement plan distributions made to an alternate payee under a qualified domestic relations order (doesn’t apply to IRAs). | Excludes IRAs |
| 07 | IRA distributions made to certain unemployed individuals for health insurance premiums. | IRAs only |
| 08 | IRA distributions made for qualified higher education expenses. | IRAs only |
| 09 | IRA distributions made for the purchase of a first home, up to $10,000. | IRAs only |
| 10 | Qualified retirement plan distributions made due to an IRS levy. | — |
| 11 | Qualified distributions to reservists while serving on active duty for at least 180 days. | — |
| 12 | Distributions incorrectly indicated as early distributions by code 1, J, or S in box 7a of Form 1099-R. Include on line 2 the amount you received when you were age 59½ or older. | — |
| 13 | Distributions from an eligible governmental section 457 plan, that aren’t from a rollover from a qualified retirement plan. | — |
| 14 | Distributions from a plan maintained by an employer if: You separated from service by March 1, 1986; as of March 1, 1986, your entire interest was in pay status under a written election that provides a specific schedule …; and the distribution is actually being made under the written election. | — |
| 15 | Distributions that are dividends paid with respect to stock described in section 404(k). | — |
| 16 | Distributions from annuity contracts to the extent that the distributions are allocable to the investment in the contract before August 14, 1982. … | — |
| 17 | Distributions that are phased retirement annuity payments made to federal employees. | — |
| 18 | Permissible withdrawals under section 414(w) from eligible automatic contribution arrangements. | — |
| 19 | Qualified birth or adoption distributions. … a distribution of up to $5,000 if made during the 1-year period beginning on the date your child was born or adopted. | — |
| 20 | Distributions due to terminal illness. … on or after the date on which your physician has certified that you have a terminal illness … that can reasonably be expected to result in death in 84 months or less … | — |
| 21 | Corrective distributions of the income on excess contributions distributed before the due date of the tax return (including extensions). … | — |
| 22 | Qualified distributions to victims of domestic abuse. A distribution made from an applicable eligible retirement plan … during the 1-year period beginning on any date on which the individual is a victim of domestic abuse by a spouse or a domestic partner. | — |
| 23 | Distributions for eligible emergency expense distributions. A distribution from an applicable eligible retirement plan for the purposes of meeting the unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses. | — |
| 24 | Distributions for qualified long-term care distributions. However, if the individual covered by the long-term care coverage is the spouse of the employee, this exception applies only if the employee and employee’s spouse file a joint return. | — |
| 99 | Enter this exception number if more than one exception applies. | — |
A dash means only that the text of that number neither excludes IRAs nor limits the number to them; it does not mean the exception works for an IRA. Number 13 names an eligible governmental section 457 plan and 14 “a plan maintained by an employer,” and the What’s New note behind 24 describes a distribution from “your employer’s defined contribution plan.” Numbers 19, 22 and 23 refer to “an applicable eligible retirement plan,” and 21 describes IRA excess contributions. Several numbers send you elsewhere: 19 asks for an attached statement with the child’s name, age and TIN, and 22 and 23 point to Notice 2024-55 for details. If your withdrawal came from a 401(k) after leaving a job at 55, our explainer on the rule of 55 shows how number 01 works in practice.
What is new for 2026: number 24
Last year’s final instructions told filers to enter an exception number “(01–23).” The 2026 draft says “(01–24).” The addition comes with the draft’s “What’s New” note: “Beginning with distributions made after December 29, 2025, a distribution from your employer’s defined contribution plan for or with respect to certified long-term care insurance is not subject to the 10% additional tax on early distributions if certain requirements are met.”
The line 2 entry is number 24, and the catch is the joint-return condition. If the long-term care coverage is for the employee’s spouse, the exception applies only if the two of them file a joint return. A couple who file separately would not get the exception for a spouse’s coverage. The draft points to Notice 2026-33 for the rules. We cover the dollar cap, the plan-optional detail and the 1099-R side in our guide to the qualified long-term care distribution under the $2,600 cap.
Number 12: the fix for a wrongly coded 1099-R
Number 12 is easy to overlook, and it handles a practical problem: a Form 1099-R that reports a distribution as early, with code 1, J or S in box 7a, even though part of it was paid after your 59½ birthday. The Form 1099-R instructions describe code 1 as “Early distribution, no known exception,” to be used “only if the participant has not reached age 59½,” and code S the same way for a SIMPLE IRA in its first 2 years. Code J is the Roth IRA counterpart: “Early distribution from a Roth IRA, no known exception.” A form coded this way reports the distribution to the IRS as early, with no known exception.
Number 12 lets you correct that on your own return. Suppose you turn 59½ on August 15, 2026. You took $5,000 from a traditional IRA in May and $4,000 in October, all of it taxable, and the custodian coded the whole $9,000 as 1. On Form 5329 you enter $9,000 on line 1. You then enter $4,000 on line 2 with exception number 12, the amount received after you reached 59½, which leaves $5,000 on line 3 and a tax of $500. Without number 12 the tax on the same form would have been $900. Keep the dates of the withdrawals and a record of your birth date with your tax file.
Number 99 when two exceptions overlap
Number 99 is for a return where more than one exception applies. Take the same $9,000 coded 1, but suppose $3,000 of the May withdrawal paid qualified higher education expenses (exception 08, an IRA exception) in addition to the $4,000 received after 59½. The code 1 is not a mistake for that $3,000: the Form 1099-R instructions tell payers to use code 1 even if the distribution is made for qualified higher education expenses. Line 2 becomes $7,000, you write 99 in the space provided, line 3 is $2,000 and the tax is $200. The instructions do not ask you to list every number on the form itself, but keep your own worksheet showing how each part of the $7,000 was reached.
When you do not need Form 5329 at all
Form 5329 is not always required. The “Who Must File” section says you do not need Form 5329 if distribution code 1 is correctly shown in box 7a of all your Forms 1099-R and you owe the 10% additional tax on the full amount shown on each one. In that case you report the tax directly on Schedule 2 (Form 1040), line 5. You do need the form, however, if box 7a does not show the exception that applies or the exception does not cover the whole distribution. The instructions put it bluntly: “In general, you must file Form 5329 to report an exception to the 10% additional tax on an early distribution from a qualified retirement plan, including an IRA.” The part of a distribution you roll over, generally within 60 days, isn’t subject to the 10% additional tax; for how to report the rollover, the instructions point you to the Form 1040 instructions for lines 4a and 4b or lines 5a and 5b. A plan loan that you cannot repay is a different problem, and our comparison of a 401(k) loan versus a withdrawal explains why the choice can change the tax bill.
If both spouses must file the form, each completes a separate Form 5329 and the combined tax goes on Schedule 2.
Sources
- IRS, Instructions for Form 5329 (2026), early release draft dated November 6, 2026 (Line 2, PDF pp. 5-6; What’s New and Who Must File, PDF p. 2; Definitions, PDF p. 3; Joint returns and Part I, PDF p. 4; Line 4, PDF p. 6) — https://www.irs.gov/pub/irs-dft/i5329—dft.pdf
- IRS, Instructions for Form 5329 (2025), final (line 2 range “01–23”) — https://www.irs.gov/pub/irs-pdf/i5329.pdf
- IRS, Instructions for Forms 1099-R and 5498 (2026), early release draft (codes 1, J and S in box 7a, Table 1, PDF pp. 20-22) — https://www.irs.gov/pub/irs-dft/i1099r—dft.pdf
- IRS, Notice 2026-33, Guidance on Qualified Long-Term Care Distributions (Internal Revenue Bulletin 2026-24) — https://www.irs.gov/irb/2026-24_IRB
- IRS, Notice 2024-55 (emergency expense and domestic abuse distributions) — https://www.irs.gov/irb/2024-28_IRB
Quick answers
What is the new exception number on Form 5329 for 2026?
Number 24. The 2026 draft instructions describe it as "Distributions for qualified long-term care distributions." If the person covered by the long-term care coverage is the employee's spouse, the exception applies only if the employee and the spouse file a joint return. The 2025 instructions stopped at 23.
What do I enter on line 2 if more than one exception applies?
Enter 99. The instructions say to enter the applicable exception number, 01 through 24, and "If more than one exception applies, enter 99." The line 2 amount is the total you can exclude under all of them.
My 1099-R shows code 1 in box 7a, but I was older than 59½. What do I do?
Use exception number 12, which covers "Distributions incorrectly indicated as early distributions by code 1, J, or S in box 7a of Form 1099-R." Include on line 2 the amount you received when you were age 59½ or older. The instructions for number 12 do not make a corrected Form 1099-R a condition for using it.
Do all the exception numbers work for IRAs?
No. Numbers 01 and 06 are labeled as not applying to IRAs. Numbers 07, 08 and 09 are written for IRA distributions only. Check the wording of the number before you use it on an IRA withdrawal.
When can I skip Form 5329 entirely?
If distribution code 1 is correctly shown in box 7a of all your Forms 1099-R and you owe the 10% additional tax on the full amount of each one, you do not have to file Form 5329. You report the tax directly on Schedule 2 (Form 1040), line 5.
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