Most Roth IRA withdrawals are tax-free, but not all of them
The short answer: withdrawals of money you contributed yourself are never taxed. Withdrawals of earnings (the investment gains) are tax-free only if you meet two conditions — your account must be at least five years old, and you must be at least 59½ years old, disabled, dead, or withdrawing up to $10,000 for a first home purchase. If you take earnings out before meeting both conditions, you owe income tax on those earnings plus a 10 percent early withdrawal penalty.
The IRS treats Roth IRAs differently from traditional IRAs because you already paid income tax on the money going in. That tax-paid status is what makes withdrawals special. But the IRS still watches how much you withdraw and when, because the tax benefit only applies if you follow the rules.
Key Takeaways
- Contributions (the money you put in) come out tax-free and penalty-free at any time, no matter your age or how long the account has existed.
- Earnings are tax-free only if your account is five years old and you are at least 59½, or you meet one of four other narrow exceptions.
- If you withdraw earnings before the five-year mark or before age 59½, you owe income tax on those earnings plus a 10 percent penalty.
- The IRS uses a "pro-rata rule" that treats all your Roth IRAs as one account when calculating how much of a withdrawal is contributions versus earnings.
How the IRS tells contributions apart from earnings
Your Roth IRA holds two types of money: contributions (what you deposited) and earnings (what your investments made). The IRS taxes them differently on withdrawal. Contributions always come out tax-free because you paid income tax on that money before it went into the account. Earnings come out tax-free only under specific conditions.
When you withdraw money, the IRS does not let you choose which type comes out first. Instead, it uses the pro-rata rule: it treats all your Roth IRAs as a single pool and calculates what percentage is contributions versus earnings. That percentage applies to every withdrawal you make that year. If your total Roth balance is 70 percent contributions and 30 percent earnings, then 30 percent of any withdrawal you take counts as earnings subject to tax and penalty.
This matters most if you have multiple Roth IRAs or if you have rolled money from a traditional IRA into a Roth. The pro-rata rule applies across all Roth accounts you own, even if you try to withdraw from only one account.
The five-year rule and what it actually means
Before you can withdraw earnings tax-free, your Roth IRA must be at least five years old. The clock starts on January 1 of the year you opened the account, not on the day you funded it. If you opened a Roth IRA on December 31, 2023, the five-year period ends on January 1, 2029 — even though only two days have passed.
The five-year rule applies separately to each Roth IRA you own. If you open a second Roth IRA in 2025, that account has its own five-year clock starting January 1, 2025. You cannot borrow the five-year status from your older account.
The five-year rule is about the account, not about your age. You can be 70 years old with a brand-new Roth IRA, and you still cannot withdraw earnings tax-free until five years have passed — even though you are well past 59½.
When you can withdraw earnings without tax or penalty
Even if your account is less than five years old, you can withdraw earnings without the 10 percent penalty (though you still owe income tax) if you are disabled or if the withdrawal goes to your beneficiary after your death. You can also withdraw up to $10,000 in earnings penalty-free for a first-time home purchase, though you still owe income tax on that amount.
A fourth exception exists: you can withdraw earnings penalty-free (but not tax-free) to pay unreimbursed medical expenses that exceed 7.5 percent of your adjusted gross income, or to pay health insurance premiums while unemployed. These exceptions waive the penalty but not the income tax.
The disability and death exceptions do not require the account to be five years old. The first-home-purchase exception does require the five-year rule to be met — you cannot use a brand-new Roth IRA to fund a home purchase without owing taxes on the earnings portion.
What happens if you withdraw earnings early
If you withdraw earnings before your account is five years old and before you turn 59½ (and you do not meet one of the four exceptions above), you owe two things: income tax on the earnings at your regular tax rate, plus a 10 percent early withdrawal penalty on the earnings.
The penalty is calculated on the earnings portion only, not on your contributions. If you withdraw $5,000 from an account that is 60 percent contributions and 40 percent earnings, the $2,000 in earnings gets hit with the 10 percent penalty ($200), but the $3,000 in contributions does not.
You report this withdrawal on Form 8606 (Nondeductible IRAs), which tells the IRS how much was contributions versus earnings. The earnings portion gets added to your taxable income for the year, and the penalty appears as a separate line item on your tax return.
Roth conversions and the five-year rule
If you converted money from a traditional IRA or 401(k) into a Roth IRA, that converted money has its own five-year waiting period before you can withdraw it penalty-free. The five-year clock for a conversion starts on January 1 of the year you did the conversion, separate from the five-year clock for the account itself.
This creates a complex situation: you might have an old Roth IRA (past the five-year mark) but a recent conversion (not yet past its five-year mark). The conversion money sits in a separate bucket for penalty purposes. If you withdraw converted money before its five-year period ends and before age 59½, you owe the 10 percent penalty on that converted amount, even though your account is old enough.
Contributions you made directly to the Roth (not conversions) do not have a five-year waiting period for penalty purposes — they come out penalty-free at any time. Only the earnings and converted amounts are subject to the five-year rule.
How to track what you have withdrawn and what remains
Your Roth IRA custodian (the bank or brokerage holding the account) sends you a Form 5498 each year showing contributions and conversions. Keep these forms for as long as you own the account. They are your record of how much you put in.
When you withdraw money, the custodian reports it on Form 1099-R. This form shows the total amount withdrawn but does not break down contributions versus earnings — that calculation is your responsibility. Form 8606 is where you do that math and tell the IRS what portion was taxable.
If you have made conversions, track the conversion date and amount separately. The IRS does not automatically know when your five-year conversion period ends, so you need to keep your own records to prove you are past the waiting period when you withdraw that money.
Frequently Asked Questions
Can I withdraw my contributions without paying taxes?
Yes. Contributions come out tax-free and penalty-free at any time, regardless of your age or how long you have owned the account. The IRS considers this your own money that you already paid tax on. You can withdraw contributions to cover an emergency without any tax consequence.
What if I do not know how much of my withdrawal is earnings versus contributions?
Your custodian can tell you the breakdown of your account balance. Ask them for the total contributions you have made and the current balance, and they can calculate the earnings. If you have made conversions, ask them to separate conversion amounts from direct contributions, because conversions have different rules.
Do I have to report a withdrawal of just contributions on my tax return?
No. Withdrawals of contributions do not appear on your tax return at all. The Form 1099-R your custodian sends will show the total withdrawal, but you report only the taxable portion (earnings) on Form 8606. If the entire withdrawal is contributions, you have nothing to report.
What if I am over 59½ but my account is less than five years old?
You still owe income tax on the earnings, even though you are past the age threshold. The five-year rule is separate from the age rule — both must be met for earnings to come out tax-free. You can withdraw contributions penalty-free, but earnings are taxable.
Can I avoid the pro-rata rule by keeping my Roth IRAs separate?
No. The IRS treats all Roth IRAs you own as one account for pro-rata purposes, even if they are at different banks or brokerages. You cannot split them up to avoid the rule. If you have multiple Roths, add up all the contributions and all the earnings across every account to calculate your ratio.