How Roth IRA Tax-Free Withdrawal Rules Work
A qualified distribution is a Roth IRA withdrawal that’s fully tax-free, including your earnings. Earnings are the growth on the money you put in, such as interest or investment gains. Under IRS Publication 590-B, a withdrawal must pass two tests to qualify.
First, the 5-year period must be over. It begins with the first tax year you made a contribution to a Roth IRA set up for you. Second, the withdrawal must be:
- Made on or after you reach age 59½
- Made because you’re disabled
- Made to your beneficiary or estate after your death
- Used for a first home that meets IRS requirements, up to a $10,000 lifetime limit
When both tests are met, the withdrawal joins other types of nontaxable income. You owe no tax on your contributions or your earnings.
The Order Money Comes Out of a Roth IRA
If your withdrawal isn’t qualified, a set order decides which dollars come out first. That order works in your favor, because your contributions come out before anything else.
You fund a Roth IRA with after-tax money, meaning you already paid income tax on it. So your contributions aren’t deductible, and they aren’t taxed again when you withdraw them.
| Order | What you’re withdrawing | Tax treatment |
|---|---|---|
| 1 | Regular contributions | Not taxed |
| 2 | Conversion and rollover contributions, oldest first | May face the 10% additional tax if withdrawn within 5 years and before age 59½ |
| 3 | Earnings | Tax-free if qualified; otherwise may be taxed as ordinary income |
Within each conversion, the portion that was taxable when you converted comes out before the nontaxable portion.
How Non Qualified Roth IRA Withdrawals Are Taxed
Each type of money in the table above follows its own rule when a withdrawal isn’t qualified.
Regular Contributions
You can withdraw up to the total you’ve contributed without owing tax, even before age 59½.
Conversions
A conversion is moving money from another retirement account, such as a traditional IRA, into a Roth IRA. Each conversion gets its own 5-year clock, which starts January 1 of the year you convert. So a conversion made February 25, 2025, starts its clock January 1, 2025.
A regular contribution for 2024 made that same day starts its clock January 1, 2024. If you withdraw converted money within 5 years and before age 59½, you may owe the 10% additional tax unless an exception applies.
Earnings
Earnings in a nonqualified withdrawal may be taxed as ordinary income, which is how most IRA withdrawals are taxed. If you’re under 59½, you may also owe the 10% additional tax unless an exception applies.
You generally report a nonqualified Roth IRA distribution on Form 8606.
Example of a Roth IRA Withdrawal
Maya is 40 and opened her first Roth IRA in 2019. She has contributed $20,000, and the account is now worth $26,000, so $6,000 is earnings. She has never made a conversion.
In 2026, Maya withdraws $15,000. Her 5-year period is over, but she’s under 59½ and has no other qualifying reason, so the withdrawal isn’t qualified. Because contributions come out first, the full $15,000 is contributions and isn’t taxed.
If Maya instead withdrew $23,000, the last $3,000 would be earnings. That $3,000 may be taxed as ordinary income and face the 10% additional tax unless an exception applies.
Sources
- IRS, Publication 590-B
- IRS, Topic 557
- IRS, About Form 8606
