What if I need to withdraw money from my Roth IRA before the fifth tax year after the initial year for which a contribution was made?
If withdrawals from a Roth IRA are needed before the fifth tax year after the initial year for which a contribution is made, for tax purposes it is assumed that contributions are taken first. This means that no income tax is due on that portion of the withdrawal, since the contributions were made from income that was already subject to taxation. Amounts withdrawn prior to the fifth tax year that exceed the total amount of contributions are considered to be withdrawals of investment earnings and are subject to income tax. The 10% tax penalty will also apply unless the distribution is due to death, disability, attainment of age 59½, withdrawals of substantially equal periodic payments, medical expenses greater than 7.5% of Adjusted Gross Income, health insurance for certain unemployed, qualifying educational expenses, or qualifying first home purchase expenses.
Related Questions
- If the donor does not have enough tax liability in the tax year the contribution is made, can the credits be used on subsequent tax returns?
- What if I need to withdraw money from my Roth IRA before the fifth tax year after the initial year for which a contribution was made?
- Are beneficiaries required to withdraw money from a Roth IRA?
