What’s the Penalty for Taking Money Out of a Roth IRA?

The penalty for taking money out of a Roth IRA depends entirely on what part of the account you’re pulling from. Your own contributions come out tax-free and penalty-free at any age, for any reason. Earnings are where the cost lives: withdraw them before you turn 59½ or before your Roth has been open five tax years, and you can owe ordinary income tax on that portion plus a 10% early withdrawal penalty, unless a specific exception applies.¹

Contributions Come Out First, and That Usually Ends the Story

The IRS doesn’t let you pick what you’re withdrawing. Every Roth IRA distribution is treated as coming from your money in a fixed order, no matter which investments you actually sold inside the account:

Regular contributions come out first. You already paid tax on this money, so it’s tax-free and penalty-free coming back out.
Conversion and rollover amounts come out next, on a first-in, first-out basis. Within each conversion, the portion that was taxable when you converted is treated as withdrawn before the non-taxable portion.
Earnings come out last. Only after you’ve exhausted every dollar of contributions and conversions do you touch investment growth.

This ordering runs across all your Roth IRAs combined, not account by account.² The practical result is that many withdrawals cost nothing. If you’ve contributed $40,000 over the years and the account is worth $55,000, you can take out up to $40,000 with no tax and no penalty at any age.¹ The penalty questions only start once your withdrawal exceeds what you’ve put in.

The 10% Early Withdrawal Penalty

The IRS adds a 10% tax on the taxable portion of any Roth IRA distribution taken before age 59½ that isn’t covered by an exception. It sits on top of any regular income tax you owe.³ Because of the ordering rules, this penalty can only reach you after you’ve withdrawn everything you contributed and everything you converted.

A worked example makes the math obvious. Say you’re 45, you’ve contributed $30,000 over the years, and the account is now worth $42,000. You withdraw $35,000. The first $30,000 is treated as contributions and comes out tax-free. The remaining $5,000 is earnings. You’d owe income tax on that $5,000 at your regular rate, plus a $500 penalty (10% of $5,000).

When Earnings Come Out Tax-Free

Earnings escape both the income tax and the 10% penalty if your withdrawal is a “qualified distribution.” That requires passing two tests at the same time.¹

The first is the five-year rule. Five full tax years must have passed since January 1 of the year you first contributed to any Roth IRA. If your first contribution was made in April 2023 for the 2022 tax year, the clock started January 1, 2022, and the requirement is met on January 1, 2027. The clock runs once across all your Roth IRAs, so opening a new account later doesn’t reset anything.

The second test requires at least one of these to be true: you’re 59½ or older, you’re disabled as defined by federal tax law, the distribution is going to a beneficiary after the account owner’s death, or you’re withdrawing up to $10,000 for a first-time home purchase. That last one catches people off guard. A first-time homebuyer withdrawal that also meets the five-year rule is fully qualified, so the earnings come out tax-free and penalty-free up to the $10,000 lifetime cap.¹ For IRA purposes, “first-time homebuyer” means you (and your spouse, if married) haven’t owned a principal residence during the two years before the purchase.⁴

Meet the five-year rule but none of those conditions, and your earnings become taxable income for the year. The 10% penalty can still apply on top unless a separate exception covers you. Reverse the situation — over 59½ but the five-year rule isn’t satisfied — and earnings are taxable as income, but the 10% penalty does not apply.

Exceptions That Waive the 10% Penalty

Even if your withdrawal reaches into earnings and you’re under 59½, a list of exceptions eliminates the 10% penalty. The earnings are still added to your taxable income for the year unless the withdrawal also qualifies under the rules above, but the penalty itself goes away.⁵

First-time home purchase, up to $10,000 in earnings over your lifetime across all your IRAs.³
Qualified higher education expenses for you, your spouse, your children, or your grandchildren — tuition, fees, books, and supplies.
Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income for the year.
Health insurance premiums while unemployed, if you received unemployment compensation for at least 12 consecutive weeks.
Disability or death.
Substantially equal periodic payments (SEPP) using an IRS-approved calculation method. The payments must continue for the longer of five years or until you turn 59½; breaking the schedule early triggers a retroactive recapture penalty on every previous payment.⁶
An IRS levy against your IRA to satisfy a tax debt.
Birth or adoption, up to $5,000 per parent within one year of the birth or finalized adoption.³
Terminal illness, if a physician certifies that you’re expected to die within 84 months. You have the option to repay within three years.⁴
Domestic abuse by a spouse or domestic partner, up to the lesser of $10,000 or 50% of the account balance.
Emergency personal expenses — one withdrawal of up to $1,000 per calendar year, with a three-year repayment option.
Federally declared disasters, up to $22,000 per disaster, with a three-year repayment option and the income spread over three tax years.⁷

The Separate Five-Year Rule for Conversions

Roth conversions carry their own five-year clock, and this one catches people who use the backdoor Roth strategy or convert large traditional IRA balances. Each conversion starts its own five-year waiting period. Withdraw the converted amount within five years while under 59½, and the 10% penalty applies to the portion of the conversion that was taxable at the time you converted.⁸

If your traditional IRA was entirely pre-tax, the full conversion was taxable, and the full amount is exposed to this recapture penalty if pulled out too soon. Once you turn 59½, the conversion five-year rule stops mattering for penalty purposes.

The 60-Day Rollover Trap

One of the easiest ways to trigger a penalty by accident is a botched rollover. If you take a Roth IRA distribution meaning to move it to another Roth IRA and don’t complete the rollover within 60 days, the IRS treats the whole amount as a permanent distribution. Any earnings portion becomes taxable income, and if you’re under 59½ the 10% penalty stacks on top.⁹

A direct trustee-to-trustee transfer sidesteps the risk entirely because the money never passes through your hands. If you’re moving a Roth IRA between brokerages, ask for a direct transfer rather than taking a check and trying to redeposit it in time.

A Different Roth Penalty: Excess Contributions

One penalty gets confused with withdrawal penalties even though it’s about the opposite problem. If you contribute more than the annual limit ($7,500 for 2026, or $8,500 if you’re 50 or older) or contribute when your income exceeds the phase-out range, the excess is hit with a 6% excise tax for every year it stays in the account.¹⁰ For 2026 the phase-out range is $153,000 to $168,000 for single filers and $242,000 to $252,000 for married couples filing jointly.¹¹

You can avoid the 6% tax by withdrawing the excess and any earnings it generated before your tax filing deadline, including extensions. The earnings you pull out are taxable in the year the excess was contributed. Miss the deadline and there’s a six-month grace period — withdraw the excess and file an amended return with “Filed pursuant to section 301.9100-2” written at the top.¹² Miss both, and the 6% tax applies every year until you fix it.

Reporting the Withdrawal on Your Return

Every Roth IRA distribution gets reported to the IRS, even one that’s completely tax-free. Your custodian sends Form 1099-R showing the gross distribution in Box 1 and a distribution code in Box 7. Code J, for instance, flags an early Roth distribution.¹³

You file Form 8606, Part III, to calculate how much of the distribution is actually taxable. The form tracks your cumulative contributions, conversions, and prior distributions so the IRS can verify you applied the ordering rules correctly.¹⁴ Keep copies of every Form 8606 you file until you’ve distributed all your Roth IRA funds.

If any portion triggers the 10% penalty, or if you qualify for an exception, file Form 5329 as well. This is where you calculate the penalty and enter an exception code to waive it.⁸ Skipping Form 5329 when you qualify for an exception is a common and costly mistake. The IRS will assess the penalty based on the 1099-R alone and leave it to you to prove you were exempt.

1
Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
2
Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs
3
Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions from Traditional and Roth IRAs
4
Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
5
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
6
Internal Revenue Service. Substantially Equal Periodic Payments
7
Internal Revenue Service. Instructions for Form 8915-F
8
Internal Revenue Service. Instructions for Form 5329 (2025)
9
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
10
Office of the Law Revision Counsel. 26 U.S. Code 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts
11
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
12
Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs)
13
Internal Revenue Service. About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
14
Internal Revenue Service. Instructions for Form 8606 (2025)