You do not pay taxes on Roth IRA withdrawals if you follow the rules

The core rule is simple: if you are at least 59½ years old and have held the Roth IRA for at least five tax years, you withdraw money tax-free. The IRS does not tax your earnings, and you do not report the withdrawal on your tax return. This is the main reason people open Roth IRAs instead of traditional IRAs.

If you do not meet both conditions — age 59½ and five-year holding period — the tax treatment depends on what you are withdrawing. You can always pull out your contributions (the money you put in) without taxes or penalties, no matter your age. But your earnings (the growth on that money) face income tax and potentially a 10% early withdrawal penalty if you do not may have access to for an exception.

The five-year clock starts on January 1 of the year you made your first Roth contribution, not the date you opened the account. If you opened a Roth in June 2020 and contributed, the five years end on January 1, 2025. If you opened one in December 2024 and contributed, the five years end on January 1, 2029.

Key Takeaways

  • Withdrawals are tax-free if you are 59½ or older and have held the Roth for at least five tax years, regardless of how much you withdraw.
  • You can withdraw your contributions at any age without taxes or penalties, but earnings withdrawals before 59½ face income tax and a 10% penalty unless an exception applies.
  • The five-year holding period starts on January 1 of the year you made your first contribution, not when you opened the account.
  • Certain hardships — disability, death, first-time home purchase, and may have access to education expenses — let you withdraw earnings before 59½ without the 10% penalty, though income tax still applies to earnings.
  • If you convert a traditional IRA to a Roth, the five-year rule for that conversion applies separately to the converted amount.

How the IRS tells contributions apart from earnings

The IRS uses a formula called the pro-rata rule to determine what portion of your withdrawal is contributions (tax-free) and what portion is earnings (taxable). You cannot simply withdraw contributions first and leave earnings behind.

The formula looks at all your IRAs together — traditional, SEP, SIMPLE, and Roth — on December 31 of the year you withdraw. It calculates the ratio of pre-tax money to after-tax money across all accounts, then applies that ratio to your withdrawal. If you have $50,000 in a traditional IRA and $10,000 in a Roth IRA, and $8,000 of the Roth is earnings, a $5,000 Roth withdrawal is treated as roughly 83% contributions and 17% earnings based on the total pool.

This rule catches many people off guard. You cannot avoid it by keeping accounts separate or by naming them differently. The IRS aggregates them automatically. If you want to withdraw only contributions from a Roth, you must first move or roll over any traditional IRAs to a workplace plan (401(k), 403(b), or 457) if your plan allows it, which removes them from the pro-rata calculation.

Early withdrawal exceptions that waive the 10% penalty

If you withdraw earnings before 59½, you owe income tax on those earnings. But the IRS waives the 10% early withdrawal penalty in specific situations. Income tax still applies — only the penalty disappears.

The main exceptions are: you are disabled (as defined by the IRS, not your own assessment); you are deceased (your beneficiary withdraws); you are a first-time homebuyer withdrawing up to $10,000 lifetime; you have unreimbursed medical expenses above 7.5% of your adjusted gross income; you are paying health insurance premiums while unemployed; or you are withdrawing for may have access to education expenses (tuition, fees, books, room and board for you or a dependent attending college at least half-time).

The education exception is broad. It covers tuition and mandatory fees, books and supplies, equipment (including a computer), and room and board if the student attends at least half-time. It does not cover room and board if the student lives at home. You do not have to prove the withdrawal came from earnings; the IRS assumes it did and waives the penalty if the exception applies.

Roth conversions and the separate five-year rule

If you convert money from a traditional IRA to a Roth IRA, that converted amount has its own five-year holding period. You can withdraw your original contributions to the Roth anytime tax-free, but converted amounts face the five-year rule and the 10% penalty if you withdraw before 59½ and do not meet an exception.

The five-year clock for a conversion starts on January 1 of the year you converted, separate from the clock for your regular Roth contributions. If you converted in 2023, that conversion's five-year period ends on January 1, 2028. If you converted again in 2024, that conversion's five-year period ends on January 1, 2029.

The pro-rata rule applies to conversions too. If you convert a traditional IRA that contains both pre-tax and after-tax money, the IRS treats the conversion as a proportional mix of both. You cannot convert only the after-tax portion to avoid taxes on the pre-tax money.

What happens if you withdraw before meeting the rules

If you withdraw earnings before 59½ and do not may have access to for an exception, you owe income tax on the earnings at your ordinary tax rate, plus a 10% penalty. The penalty is calculated on the earnings portion only, not your contributions.

Example: You withdraw $5,000 from your Roth at age 45. The IRS determines $3,000 is contributions and $2,000 is earnings. You owe income tax on the $2,000 at your tax bracket (say 22%, or $440) plus a 10% penalty on the $2,000 ($200). Your total tax bill is $640. The $3,000 in contributions comes out tax-free.

You report the withdrawal on Form 8606 (Nondeductible IRAs), which the IRS uses to track your basis (contributions) in all IRAs. If you do not file Form 8606, the IRS may assume the entire withdrawal is earnings and tax you accordingly. You can amend a prior return to file Form 8606 if you missed it.

Inherited Roth IRAs and the withdrawal rules

If you inherit a Roth IRA from someone other than a spouse, the five-year rule still applies to earnings, but the age requirement does not. You can withdraw earnings tax-free if the original account holder had held the Roth for five tax years, regardless of your age. If the five-year period has not passed, you owe income tax on earnings (but no 10% penalty, since the penalty does not apply to inherited accounts).

If you inherit a Roth from your spouse, you can treat it as your own or keep it as an inherited account. If you treat it as your own, the five-year holding period resets to January 1 of the year you make that election. If you keep it as inherited, the original five-year period applies.

Roth IRA withdrawals and your tax return

If your withdrawal is entirely contributions, you do not report it on your tax return at all. If your withdrawal includes earnings and you are over 59½ with a five-year holding period, you also do not report it.

If your withdrawal includes earnings and you do not meet both conditions, you report the taxable portion on Form 8606. The form calculates your basis and tells you how much of the withdrawal is taxable. You then report the taxable earnings on your 1040 as income. If you owe the 10% penalty, you report it on Form 5329 (Additional Taxes on may have access to Plans).

Many tax software programs ask about Roth withdrawals and generate these forms automatically. If you withdraw before 59½ and do not report the earnings, the IRS will likely catch it when they match your withdrawal to the Roth custodian's Form 5498-R (Roth Conversion Information), which reports all distributions.

Frequently Asked Questions

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

Yes. Contributions to a Roth IRA are not deductible, so the IRS already knows about them. You can withdraw contributions at any age without filing any forms or reporting the withdrawal, as long as you can document which portion is contributions versus earnings. Your custodian's statements show this breakdown.

What if I need money before 59½ but do not have an exception?

You can withdraw your contributions tax-free. If you need more than your contributions, you can withdraw earnings but will owe income tax and the 10% penalty on the earnings portion. Some people take a loan from their 401(k) instead to avoid this cost, or they wait and withdraw only contributions.

Does the five-year rule reset if I move my Roth to a different bank?

No. Moving a Roth IRA from one custodian to another (a trustee-to-trustee transfer) does not reset the five-year clock. The clock is tied to your first contribution, not to the account or custodian. Direct rollovers and transfers do not affect the holding period.

If I convert a traditional IRA to a Roth, do I pay taxes on the conversion?

Yes, you pay income tax on the converted amount in the year of conversion (unless it was after-tax money). The conversion itself is taxable, separate from the five-year rule. The five-year rule then determines whether you can withdraw that converted amount before 59½ without the 10% penalty.

What if my Roth IRA loses money — can I deduct the loss?

No. Losses in a Roth IRA cannot be deducted on your tax return. If your Roth balance drops, you simply have less to withdraw later. This is one reason to keep a Roth IRA separate from a traditional IRA — losses in a traditional IRA can sometimes be deducted, but only if all your IRAs combined end below your basis.