Roth IRA distributions are tax-free if you meet two conditions

Distributions from a Roth IRA are not taxed if you have held the account for at least five tax years and you are age 59½, disabled, deceased (for beneficiaries), or withdrawing up to $10,000 for a first-time home purchase. If you take money out before meeting both conditions, the earnings portion of your withdrawal is taxed as ordinary income, and you may owe a 10 percent early withdrawal penalty on top of that tax. The contribution portion — money you put in yourself — always comes out tax-free, regardless of when you withdraw it.

The tax treatment depends on which part of your Roth IRA you are withdrawing. Your contributions and your earnings sit in the same account but are treated differently by the IRS. Understanding the order in which money comes out, and which withdrawals trigger taxes, determines whether you owe anything when you take a distribution.

Key Takeaways

  • Contributions to a Roth IRA come out tax-free at any time, but earnings are taxed if you withdraw before age 59½ and have not held the account for five tax years.
  • The five-year rule is measured from January 1 of the year you made your first Roth IRA contribution, not from the date of each individual contribution.
  • A 10 percent early withdrawal penalty applies to earnings withdrawn before age 59½, unless you may have access to for an exception such as disability or a first-time home purchase.
  • Roth conversions have their own five-year rule: converted money is subject to the penalty if withdrawn within five years of the conversion, even if your original Roth IRA is older.
  • The contribution portion of your withdrawal is always tax-free and penalty-free, so you can access your own money without tax consequences.

How the five-year rule works for earnings

The five-year holding period is not measured from the date you opened your account or made your most recent contribution. Instead, it starts on January 1 of the tax year in which you made your first contribution to any Roth IRA. If you opened a Roth IRA on December 15, 2023, and made a contribution for tax year 2023, your five-year period began on January 1, 2023. You satisfy the five-year rule on January 1, 2028, even if you made contributions throughout 2023 and 2024.

This rule applies across all your Roth IRAs combined. If you have multiple Roth IRAs, the five-year clock starts with your first contribution to any of them. You do not restart the clock by opening a second or third Roth IRA. Once you have satisfied the five-year rule, all earnings in all your Roth IRAs can be withdrawn tax-free, provided you also meet one of the other conditions (age 59½, disability, death, or first-time home purchase).

Contributions versus earnings: which comes out first

When you withdraw money from a Roth IRA, the IRS treats contributions as coming out before earnings. This means if you have $50,000 in contributions and $15,000 in earnings, and you withdraw $30,000, the first $30,000 is treated as contributions and comes out tax-free. You do not touch the earnings portion until all contributions are exhausted.

This ordering rule protects your own money. You can always withdraw the amount you have contributed without tax or penalty, regardless of your age or how long you have held the account. The tax and penalty risk applies only to the earnings portion — the growth your money has generated inside the account.

If you have made contributions to a Roth IRA over multiple years, the IRS does not let you choose which contributions to withdraw first. All your Roth IRAs are treated as a single pool for ordering purposes. Contributions come out first from the combined total, then earnings.

Early withdrawal penalties and exceptions

If you withdraw earnings before age 59½ and before satisfying the five-year rule, you owe a 10 percent penalty on the earnings portion, in addition to ordinary income tax. This penalty is separate from the income tax and is calculated only on the earnings you withdraw, not on your contributions.

Several exceptions allow you to withdraw earnings without the 10 percent penalty, though you may still owe income tax depending on the five-year rule. These exceptions include disability (as defined by the IRS), death (distributions to your beneficiaries), a first-time home purchase (up to $10,000 lifetime), may have access to education expenses, health insurance premiums paid while unemployed, and substantially equal periodic payments under IRS Rule 72(t). Each exception has specific requirements and documentation needs.

Even if you may have access to for an exception to the penalty, the earnings portion is still subject to ordinary income tax unless you have satisfied the five-year holding period. For example, if you withdraw $5,000 in earnings for a first-time home purchase after three years, you owe income tax on that $5,000 but not the 10 percent penalty. If you withdraw the same amount at age 59½ after three years, you owe both the income tax and the penalty.

Roth conversions and their separate five-year rule

If you have converted money from a traditional IRA, SEP IRA, or straightforward IRA into a Roth IRA, that converted money is subject to its own five-year rule. The five-year period for a conversion starts on January 1 of the year you made the conversion, not when you originally contributed the money to the traditional IRA.

Converted funds are treated as a separate category from regular contributions. If you withdraw converted money within five years of the conversion, you owe a 10 percent penalty on the amount withdrawn, even if your original Roth IRA contributions satisfy the five-year rule and you are over age 59½. The exceptions to the penalty (disability, death, first-time home purchase, and others) explore to conversions as well, but the five-year clock still runs independently.

For example, if you converted a traditional IRA to a Roth IRA in 2024 and withdrew $8,000 of that converted money in 2025, you would owe a 10 percent penalty on the $8,000 unless you may have access to for an exception. Your regular Roth IRA contributions made in 2023 would not be affected by this rule and could be withdrawn penalty-free.

may have access to versus non-may have access to distributions

The IRS calls a tax-free, penalty-free withdrawal a may have access to distribution. A may have access to distribution requires both the five-year holding period and one of the may have access to events: age 59½, disability, death, or first-time home purchase up to $10,000. Any withdrawal that does not meet both conditions is a non-may have access to distribution.

On a non-may have access to distribution, you owe income tax on the earnings portion at your ordinary tax rate for the year. You also owe the 10 percent penalty on earnings unless you fall under an exception. The contribution portion remains tax-free and penalty-free in all cases. Your Roth IRA custodian will report the distribution to you and the IRS on Form 1099-R, which shows the gross amount withdrawn and the taxable portion.

State income tax on Roth IRA distributions

Most states do not tax Roth IRA distributions, but a few do. Pennsylvania taxes all IRA distributions, including Roth distributions. New Jersey taxes Roth distributions in certain circumstances. A small number of other states have specific rules. If you live in a state with an income tax, check your state's tax authority website or speak with a tax professional to learn whether your Roth distribution is subject to state tax.

Federal tax treatment does not determine state tax treatment. You may owe no federal tax on a may have access to distribution but still owe state income tax, or vice versa. State rules can change, so it is worth confirming the current rules in your state before you take a large distribution.

Frequently Asked Questions

Can I withdraw my contributions without paying tax or penalty?

Yes. Contributions to a Roth IRA always come out tax-free and penalty-free, regardless of your age or how long you have held the account. Only the earnings portion is subject to tax and penalty if you withdraw before age 59½ and have not satisfied the five-year rule.

What happens if I withdraw earnings before five years and before age 59½?

You owe ordinary income tax on the earnings portion and a 10 percent penalty, unless you may have access to for an exception such as disability, death, first-time home purchase, or substantially equal periodic payments. The contribution portion remains tax-free.

Does the five-year rule reset if I open a second Roth IRA?

No. The five-year rule is based on your first contribution to any Roth IRA, not on individual accounts. Opening multiple Roth IRAs does not restart the clock. All your Roth IRAs are treated as one pool for the five-year holding period.

Are Roth conversions taxed differently than regular contributions?

Converted money has its own five-year rule starting from the year of conversion. If you withdraw converted funds within five years, you owe a 10 percent penalty even if your original Roth IRA is older and you are over 59½. Regular contributions and converted funds are tracked separately.

Do I have to report a may have access to Roth distribution on my tax return?

Your custodian reports the distribution on Form 1099-R, and you receive a copy. If the distribution is may have access to, you do not owe tax on it, but you may still need to report it on your return depending on your tax software or filing method. Check the instructions for your tax form or consult a tax professional.