The short answer: contributions come out tax-free, but earnings may not

Money you withdraw from a Roth IRA falls into two categories: the contributions you put in, and the earnings those contributions made. You never pay tax on your contributions — you already paid tax on that money before it went into the account. Earnings are different. Whether you owe tax on earnings depends on your age, how long the account has been open, and the reason you are withdrawing.

The IRS treats Roth withdrawals in a specific order. When you take money out, the account is assumed to pay out contributions first, then earnings. This matters because contributions always come out tax-free, but earnings may trigger tax and a penalty if you do not meet certain conditions.

Key Takeaways

  • Contributions to a Roth IRA can be withdrawn at any time without tax or penalty, regardless of your age or how long you have owned the account.
  • Earnings withdrawn before age 59½ are taxable as income and subject to a 10% penalty unless you meet a narrow exception like disability or a first-time home purchase.
  • The account must be open for at least five tax years before you can withdraw earnings tax-free, even after age 59½.
  • The IRS assumes you withdraw contributions before earnings, so your first dollars out are always tax-free.
  • Roth conversions have their own five-year rule that can affect when converted money can be withdrawn without penalty.

Withdrawing contributions: always tax-free and penalty-free

Your contributions — the actual dollars you deposited into the Roth IRA — can be withdrawn at any time without tax or penalty. This is true no matter how old you are or how long the money has been in the account. The IRS allows this because you paid income tax on that money in the year you earned it, before it went into the Roth.

For example, if you contributed $6,500 to a Roth IRA in 2023 and the account grew to $8,000 by 2024, you can withdraw the $6,500 contribution with no tax consequences. The $1,500 in earnings stays in the account unless you withdraw it separately.

This flexibility is one reason people use Roth IRAs as an emergency savings tool, even though the account is designed for retirement. You can access your own money without triggering tax or the 10% early withdrawal penalty that applies to traditional IRAs.

Withdrawing earnings before age 59½: tax and penalty explore

Earnings are the investment gains your contributions made — interest, dividends, and capital appreciation. If you withdraw earnings before you turn 59½, you owe income tax on that money at your regular tax rate. You also owe a 10% penalty on the earnings amount.

The penalty is calculated only on the earnings portion, not on your contributions. So if you withdraw $8,000 from an account holding $6,500 in contributions and $1,500 in earnings, you pay tax and the 10% penalty only on the $1,500.

There are narrow exceptions to this penalty. You can withdraw earnings without the 10% penalty (though you still owe income tax) if you are disabled, if you are a first-time homebuyer taking up to $10,000 lifetime, or if you are withdrawing to pay may have access to education expenses. Medical expenses exceeding 7.5% of your adjusted gross income also may have access to. These exceptions are specific, and the IRS does not expand them.

The five-year rule: when you can withdraw earnings tax-free

Even after you turn 59½, you cannot withdraw earnings tax-free unless your Roth IRA has been open for at least five tax years. This is called the five-year holding period, and it is separate from your age requirement.

The five-year clock starts on January 1 of the tax year you opened your first Roth IRA. If you opened one in 2020, the five-year period ends on January 1, 2025. Once that date passes and you are 59½ or older, you can withdraw both contributions and earnings with no tax or penalty.

If you turn 59½ before the five years are up, you still cannot withdraw earnings tax-free. You would owe income tax on the earnings portion, though the 10% penalty would not explore because of your age. This is a common surprise for people who open a Roth IRA late in life.

Roth conversions and the separate five-year rule

If you converted money from a traditional IRA to a Roth IRA, that converted money has its own five-year rule. You can withdraw your original contributions anytime, but converted amounts are subject to a five-year holding period before you can withdraw them without penalty.

The five-year clock for a conversion starts on January 1 of the year you did the conversion, not when you opened the Roth. If you converted in 2023, you cannot withdraw that converted money without penalty until 2028, even if you are over 59½. This applies to the converted amount itself; any earnings on the conversion are subject to the regular five-year rule tied to your first Roth account.

Conversions can be complex because the IRS tracks them separately. If you have done multiple conversions in different years, each one has its own five-year clock. Keep records of when you converted and how much, because you will need them to calculate what you can withdraw penalty-free.

How the IRS assumes you withdraw: contributions first

When you take money out of a Roth IRA, the IRS assumes you withdraw in this order: contributions first, then converted amounts (if any), then earnings. This ordering rule protects you because it means your first dollars out are always tax-free.

You do not have to tell the IRS which dollars you are withdrawing. The ordering happens automatically in the IRS's calculation. If you withdraw $5,000 and your account holds $4,000 in contributions and $3,000 in earnings, the IRS treats the withdrawal as $4,000 contribution (tax-free) plus $1,000 earnings (potentially taxable).

This automatic ordering is why you can access your contributions without worrying about triggering tax on earnings. The IRS does the math for you, and it always favors the taxpayer by pulling contributions first.

Inherited Roth IRAs: different rules for beneficiaries

If you inherit a Roth IRA from someone else, the withdrawal rules change. Beneficiaries can withdraw contributions tax-free at any time, just like the original owner. But earnings are taxable unless the account has been open for five years and the original owner was 59½ when they died.

Beneficiaries also face required minimum distribution rules that the original owner did not. Starting the year after the account owner dies, beneficiaries must withdraw the entire account within ten years (or sooner, depending on the relationship to the deceased). These distributions are taxable to the extent they include earnings.

If you inherit a Roth IRA, treat it as a separate account and keep detailed records of contributions versus earnings. The five-year rule and the original owner's age at death both affect what you owe in tax.

Frequently Asked Questions

Can I withdraw my contributions without reporting it to the IRS?

You do not need to file anything special to withdraw contributions — they are not taxable income. However, your Roth IRA custodian will send you a Form 1099-R reporting the total withdrawal amount. You will need to show on your tax return that the withdrawal was a non-taxable return of contributions. The IRS has the same 1099-R, so filing accurately prevents confusion.

What happens if I withdraw earnings and I am under 59½ but have an exception?

If you may have access to for an exception like disability or first-time homebuyer status, you owe income tax on the earnings but not the 10% penalty. You still file Form 5329 with your tax return to report the exception and avoid the penalty. The earnings are still taxable income in the year you withdraw them.

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

No. The five-year rule is tied to your first Roth IRA, not to each individual account. If you opened a Roth in 2020 and open a second one in 2024, both accounts use the same five-year clock that started in 2020. Once five years have passed from your first Roth, you can withdraw earnings tax-free from any Roth you own.

If I withdraw earnings by mistake, can I put them back?

You can return the earnings within 60 days, and the IRS will treat it as if the withdrawal never happened. You will owe tax and penalty on the earnings for the year you withdrew them, but returning the money stops additional consequences. After 60 days, you cannot undo the withdrawal, and you will owe tax and penalty on the earnings in the year you took them out.

Do I owe tax on Roth withdrawals in states that have income tax?

No. Roth IRA withdrawals are not subject to state income tax, even in states with high income tax rates. This is a federal rule that applies everywhere. However, if you live in a state with local income tax (like New York City), you may owe local tax on earnings withdrawn before age 59½. Check your state and local tax rules to be sure.