You can withdraw contributions from a Roth IRA to buy a house, but earnings have strict limits

A Roth IRA lets you take out the money you put in (your contributions) at any time without penalty or taxes, even before retirement. You can use those contributions toward a down payment on a house with no special permission needed. However, the investment gains your money earned inside the account are treated differently — you can only withdraw earnings penalty-free for a first-time home purchase up to $10,000 in your lifetime, and only if your account has been open for at least five years.

The distinction matters because it changes how much you can actually use. If you contributed $50,000 and it grew to $65,000, you can withdraw the full $50,000 anytime. You can also withdraw up to $10,000 of the $15,000 in earnings if you meet the first-time buyer rules. But you cannot touch earnings beyond that $10,000 without owing taxes and a 10% penalty.

Key Takeaways

  • You can withdraw all your contributions to a Roth IRA at any time for any reason, including a house down payment, without taxes or penalties.
  • Earnings (investment gains) can only come out penalty-free for a first-time home purchase if your account has been open for five tax years and you withdraw no more than $10,000 in your lifetime.
  • The IRS defines "first-time home buyer" as someone who has not owned a home in the past two years, which includes divorced or widowed people buying alone.
  • Withdrawing from a Roth IRA for a house reduces the money that would have grown tax-free for retirement, so consider whether you have other savings available first.
  • You do not need to report the withdrawal to the IRS as a special transaction — the Roth IRA custodian handles the paperwork.

How to withdraw contributions without any restrictions

Your contributions are always yours to take out. When you opened your Roth IRA, every dollar you deposited from your own paycheck or savings went in as a contribution. The IRS does not care what you do with contributions — you can withdraw them tomorrow if you want, and there are no taxes, no penalties, and no forms to file beyond what your bank sends you at tax time.

To withdraw contributions, contact your Roth IRA custodian (your bank, brokerage, or investment firm) and ask to withdraw funds. They will ask how much and may ask what the money is for, but that is just their internal record-keeping — the IRS does not require you to prove the reason. The custodian will send you the money and report it to the IRS on Form 5498-R. Since you are only withdrawing contributions, you will owe nothing extra at tax time.

The tricky part is knowing which dollars are contributions and which are earnings. Your custodian tracks this and can tell you the breakdown. If you have made multiple contributions over several years, or if you have rolled money in from another retirement account, ask your custodian for a statement showing your contribution basis — the total amount you put in yourself.

The $10,000 first-time home buyer exception for earnings

If you want to withdraw earnings (the money your investments made), the IRS allows a one-time withdrawal of up to $10,000 penalty-free, but only if you are a first-time home buyer and your account has been open for at least five tax years. This is a lifetime limit — once you use $10,000 of earnings this way, you cannot do it again in another Roth IRA, even if you open a new one.

The five-year rule is strict. The clock starts on January 1 of the tax year you opened the account, not the day you deposited money. So if you opened a Roth IRA on December 15, 2023, the five-year window closes on January 1, 2029. If you opened it on January 2, 2023, the window closes on January 1, 2028. Your custodian can tell you the exact date your account became may be able to access.

The IRS defines a first-time home buyer as someone who has not owned a principal residence in the past two years. This includes people who are divorced, widowed, or single. You do not have to be buying your very first home ever — you just cannot have owned one recently. The home must be for you, your spouse, your child, your grandchild, or your parent, so you can use the money to help a family member buy as well.

What happens if you withdraw earnings before five years or without first-time buyer status

If you withdraw earnings before your account has been open five tax years, or if you are not a first-time home buyer, you will owe income tax on those earnings plus a 10% early withdrawal penalty. The tax rate depends on your income bracket — it could be 10%, 12%, 22%, or higher. The 10% penalty is on top of that, so a $10,000 earnings withdrawal could cost you $2,000 to $4,000 or more in taxes and penalties combined.

You do not have to pay this penalty if you meet an exception, but buying a house is not an exception unless you also meet the first-time buyer and five-year rules. Other exceptions exist — disability, medical bills, education costs — but a home purchase on its own does not waive the penalty.

The IRS will not stop you from making the withdrawal. Your custodian will process it, and you will owe the taxes and penalty when you file your tax return. If you do not pay, the IRS will pursue it like any other unpaid tax.

Comparing a Roth IRA withdrawal to other down payment sources

Before you withdraw from a Roth IRA, consider what you are giving up. Money inside a Roth IRA grows tax-free for decades. A $50,000 contribution at age 35 could become $200,000 or more by age 65, depending on investment returns. If you withdraw it now for a down payment, that growth never happens. You cannot put the money back in later — you can make new contributions in future years, but you cannot re-contribute the amount you withdrew.

Other sources to explore first: a conventional mortgage with a lower down payment (many allow 3% to 5%), a first-time home buyer program through your state or city (some offer down payment grants or low-interest loans), a gift from family members, or a home equity line of credit if you own other property. Some employers offer down payment information as an employee benefit. If you have a 401(k) or similar workplace plan, you may be able to borrow from it instead of withdrawing, which means you repay yourself with interest rather than losing the money permanently.

A Roth IRA withdrawal makes the most sense if you have other retirement savings, if the amount you need is small relative to your total balance, or if you are close to retirement anyway and the money would not have decades to grow.

How to report the withdrawal on your tax return

Your Roth IRA custodian will send you a Form 5498-R in January showing the withdrawal amount. You will also receive a copy for the IRS. If you withdrew only contributions, you typically do not owe any additional tax — the withdrawal is not taxable income. You may still need to report it on your tax return depending on your situation and your tax software, but the amount itself does not increase your tax bill.

If you withdrew earnings and you meet the first-time buyer exception (five-year account and first-time buyer status), the withdrawal is still not taxable. Your tax software or tax preparer should have a field for "may have access to first-time home buyer distribution" where you can report this. Keep documentation from your custodian showing the withdrawal date and amount, in case the IRS asks questions later.

If you withdrew earnings but do not meet the exception, you will owe income tax on the earnings portion plus the 10% penalty. Your custodian may withhold taxes automatically (usually 10% to 20%), but that withholding is not the same as paying your full tax bill. You may owe more when you file your return. A tax preparer can help you calculate the exact amount.

Frequently Asked Questions

Can I withdraw from my spouse's Roth IRA to buy a house together?

No. You can only withdraw from a Roth IRA that is in your name. Your spouse can withdraw from their own Roth IRA if they meet the rules, but you cannot access their account. If you are married and both have Roth IRAs, you each can withdraw your own contributions or earnings (if may be able to access) toward the purchase.

If I withdraw $10,000 in earnings for a house, can I withdraw another $10,000 later for something else?

No. The $10,000 first-time home buyer exception is a lifetime limit across all your Roth IRAs. Once you use it, it is gone. You can still withdraw contributions anytime, but you cannot withdraw any more earnings penalty-free for any reason.

What if I open a new Roth IRA after I buy the house — does the five-year clock restart?

The five-year rule applies to each Roth IRA separately, but the first-time home buyer exception is a lifetime limit. You could open a new Roth IRA and wait five years, but you would not be able to use the first-time buyer exception again because you already used your one $10,000 lifetime withdrawal for that purpose.

Do I have to tell my mortgage lender that I withdrew from a Roth IRA?

You do not have to volunteer the information, but if the lender asks about the source of your down payment funds, you should be honest. Most lenders do not care where down payment money comes from as long as it is not borrowed (a loan would increase your debt-to-income ratio). A Roth IRA withdrawal is your own money, so it typically does not affect your loan approval.

Can I borrow from my Roth IRA instead of withdrawing?

No. Roth IRAs do not allow loans. You can only withdraw. Some workplace retirement plans like 401(k)s do allow loans, but Roth IRAs do not have that option.