Do You Pay Taxes on a Roth IRA Withdrawal? Rules and Exceptions

Whether you pay taxes on a Roth IRA withdrawal depends on what you’re withdrawing and when. The money you originally contributed always comes back to you tax-free and penalty-free, at any age, for any reason. Investment earnings are the part that can be taxed: they come out tax-free only if your Roth IRA has been open for at least five tax years and you’re either 59½, disabled, using up to $10,000 for a first home, or the account is being paid to a beneficiary after your death. Miss either piece of that test and the earnings portion is added to your income and, if you’re under 59½, hit with a 10% penalty on top.

Which Dollars Come Out First

You don’t choose which dollars leave the account. The IRS applies a fixed three-tier order to every Roth IRA distribution, and that order is why most withdrawals cost nothing.¹

Your regular contributions come out first. You already paid income tax on this money before it went in, so it always comes back out tax-free and penalty-free.
Amounts you converted or rolled over from a traditional IRA or 401(k) come out next, oldest conversion first, with the taxable portion of each conversion drawn before the nontaxable portion.
Investment earnings come out last. This is the only tier that can trigger tax or a penalty.

The practical effect: if you’ve put $50,000 into your Roth over the years and it’s now worth $70,000, a $20,000 withdrawal is all contributions. You owe nothing. You’d have to withdraw more than $50,000 before you’d touch a dollar of earnings. Form 8606 is where you keep track of these tiers when you file.¹

When Earnings Come Out Tax-Free: The Qualified Distribution Test

A withdrawal that includes earnings is fully tax-free only if it’s a “qualified distribution.” Two conditions have to be met at the same time.²

Five Tax Years Since Your First Roth Contribution

Your Roth IRA has to have been open at least five tax years. The clock starts on January 1 of the tax year of your first Roth IRA contribution, not the day you deposited the money. Open your first Roth in April 2022 and designate the contribution for tax year 2021, and your five-year period runs from January 1, 2021 through December 31, 2025.²

The clock is per person, not per account. Open a second Roth ten years later and it inherits the start date of your first one. You only satisfy the five-year rule once.

A Qualifying Event

Along with the five-year period, the withdrawal has to be triggered by one of four things:²

You’ve reached age 59½. This is the usual path. After that age and after the five-year mark, every withdrawal you take is tax-free for the rest of your life.
You’ve become totally and permanently disabled as defined by the tax code.
You’re using up to $10,000 in earnings, once in your lifetime, toward buying, building, or rebuilding a principal residence. “First-time” here just means you haven’t owned a home in the prior two years.
The account owner has died and the money is going to a beneficiary.

Both conditions have to be satisfied. Meet the five-year rule but withdraw at 55 for a reason not on the list, and it’s not qualified. Retire at 62 but pull from a Roth you opened last year, and it’s not qualified either.

What a Non-Qualified Withdrawal Actually Costs

When a withdrawal reaches into earnings and doesn’t meet the qualified test, two things happen. The earnings portion gets added to your gross income and taxed at your ordinary rate, the same as wages. If you’re under 59½, the IRS adds a 10% early withdrawal penalty on those earnings.³

The numbers get ugly fast. Someone in the 24% bracket who takes $10,000 in non-qualified earnings owes $2,400 in income tax plus a $1,000 penalty. A third of the withdrawal is gone.

The ordering rule is your friend here. Contributions come out first and cost nothing, so you only hit this problem after you’ve cleared your entire contribution base plus any conversions.

Exceptions That Kill the 10% Penalty (but Not the Tax)

Certain life events remove the 10% early withdrawal penalty even when the distribution isn’t qualified. The earnings are still added to your taxable income; you just avoid the extra 10% surcharge.⁴

Unreimbursed medical expenses above 7.5% of your adjusted gross income. Only the amount over the threshold escapes the penalty.
Health insurance premiums while unemployed, if you’ve received unemployment compensation for at least 12 weeks.
Higher education expenses (tuition, fees, books, room and board) for you, your spouse, or your children.
First-time homebuyer expenses, up to $10,000 lifetime. Even when this exception is only waiving the penalty rather than making the distribution qualified, the $10,000 cap still holds.
Birth or adoption, up to $5,000 per child, taken within a year of the event.
Qualified military reservists called to active duty for at least 180 days.
An IRS levy on the account.
Substantially equal periodic payments over your life expectancy. Once you start, you have to continue for at least five years or until 59½, whichever is later; break the schedule and the penalties apply retroactively.

SECURE 2.0 added a few more starting in 2024:⁴

One emergency personal expense withdrawal per year, capped at the lesser of $1,000 or your vested balance above $1,000. You can repay it.
Domestic abuse survivors can take the lesser of $10,000 or 50% of the account within 12 months of the abuse. You self-certify, and you have three years to repay.
Federally declared disaster losses, up to $22,000, with three years to repay.⁵

Remember the limit of all these: they wipe out the penalty, not the income tax. If the five-year rule or the age requirement isn’t met, the earnings still count as taxable income.

Conversions Have Their Own Five-Year Clock

If you’ve converted money from a traditional IRA or 401(k) into your Roth, be careful. Each conversion starts its own separate five-year clock, running from January 1 of the year of that conversion. Withdraw the converted amount before those five years are up and before you’re 59½, and the 10% penalty applies to the taxable portion of the conversion.¹

You don’t owe income tax on the converted principal a second time; you already paid it in the year of the conversion. The penalty is what this rule is guarding against, and its purpose is to stop people from using conversions as a shortcut to pull pre-tax retirement money out penalty-free before 59½.

Multiple conversions in different years each carry their own five-year period, and older conversions are treated as coming out before newer ones. Form 8606 is where this gets tracked. Sloppy accounting here leads to paying penalties you don’t owe or skipping ones you do.

Rollovers That Accidentally Become Taxable

Moving money between Roth IRAs is normally a nonevent for taxes, but two mistakes can turn a routine transfer into a distribution.⁶

The first is missing the 60-day deadline on an indirect rollover. If the check comes to you rather than going directly between institutions, you have 60 days to redeposit it in another IRA. Blow past the window and the IRS treats the whole thing as a distribution, with income tax on any earnings and a 10% penalty if you’re under 59½.

The second is doing more than one indirect rollover in a 12-month period. Since 2015, the IRS aggregates all your IRAs, traditional and Roth together, and allows only one indirect rollover across all of them per 12 months. A second one inside that window is a taxable distribution. Direct trustee-to-trustee transfers don’t count against the limit, which is why they’re the safer default.

Inherited Roth IRAs Work Differently

If you’ve inherited a Roth IRA rather than owning it yourself, different rules apply. Distributions to beneficiaries are generally tax-free as long as the original owner had satisfied the five-year holding period.⁷

A surviving spouse can roll the account into their own Roth IRA and treat it as always having been theirs, inheriting the original five-year clock. A non-spouse beneficiary who inherited after 2019 usually has to empty the account by December 31 of the 10th year after the owner’s death, though there’s no required schedule inside that window. Minor children of the owner, disabled or chronically ill beneficiaries, and anyone within 10 years of the owner’s age can stretch withdrawals over their own life expectancy instead.⁷

If the owner died before satisfying the five-year rule, the earnings portion of distributions is taxable to the beneficiary until that clock finishes running. Contributions and conversion amounts remain tax-free either way. Missing the 10-year deadline triggers a 25% excise tax on what should have been withdrawn, reduced to 10% if you fix it within two years.⁸

1
Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements
2
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
3
Internal Revenue Service. Traditional and Roth IRAs
4
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
5
Internal Revenue Service. Retirement Plans and IRAs Under the SECURE 2.0 Act of 2022
6
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
7
Internal Revenue Service. Retirement Topics – Beneficiary
8
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs