Do You Pay Taxes on Roth IRA Withdrawals and Earnings?

You do not pay federal income tax on may have access to Roth IRA withdrawals, and you never pay tax on your contributions coming out

The core rule is simple: money you withdraw from a Roth IRA after age 59½, provided the account has been open for at least five tax years, comes out tax-free. That includes both the money you put in and all the earnings it generated. The IRS treats may have access to withdrawals as a return of your after-tax dollars, not as income.

Your contributions themselves were never deductible when you made them—you paid tax on that money before it went into the account. So when you pull contributions back out at any time, for any reason, there is no tax bill. The five-year rule and age requirement apply only to the earnings portion. If you withdraw before meeting both conditions, the earnings portion becomes taxable and may trigger a 10% early withdrawal penalty.

Key Takeaways

• may have access to withdrawals from a Roth IRA—taken after age 59½ with the account open for five tax years—are completely tax-free at the federal level.
• Your contributions can always come out tax-free and penalty-free, regardless of your age or how long the account has been open.
• Earnings withdrawn before age 59½ or within five tax years of opening the account are taxable as ordinary income and usually subject to a 10% penalty.
• Some early withdrawal exceptions (disability, first-time home purchase, medical expenses) waive the 10% penalty but not the income tax on earnings.
• State and local taxes may apply to Roth IRA withdrawals depending on where you live, even though federal tax does not.

How the IRS separates contributions from earnings

The IRS uses a specific ordering rule to determine which dollars you are withdrawing first. When you take money out of a Roth IRA, contributions always come out before earnings. This means if you have $50,000 in contributions and $15,000 in earnings, and you withdraw $30,000, the first $30,000 is treated as contributions and comes out tax-free.

This ordering rule protects you in early withdrawal situations. If you need cash before age 59½, you can pull out your contributions without tax or penalty. Only once your contributions are exhausted do withdrawals start pulling from earnings, which then become subject to tax and the 10% early withdrawal penalty (unless an exception applies).

The IRS requires you to track this yourself—your brokerage or custodian will report your total distributions, but you are responsible for calculating how much is contributions versus earnings on your tax return using Form 8606.

What triggers the 10% early withdrawal penalty

If you withdraw earnings before age 59½ or before the account has been open for five tax years, the earnings portion is taxed as ordinary income plus a 10% penalty on top. The five-year clock starts on January 1 of the year you made your first contribution to any Roth IRA—not when you opened the account itself, and not separately for each contribution.

The 10% penalty applies to the earnings amount only, not to your contributions. So if you withdraw $40,000 at age 45 and $30,000 of that is contributions, only the $10,000 in earnings faces the penalty. You would owe income tax on that $10,000 plus $1,000 in penalty.

Several situations waive the 10% penalty but not the income tax on earnings: disability, medical expenses exceeding 7.5% of adjusted gross income, health insurance premiums while unemployed, and a first-time home purchase (up to $10,000 lifetime). Substantially equal periodic payments under IRS Rule 72(t) also avoid the penalty. In all these cases, the earnings are still taxable income, but the 10% penalty does not apply.

The five-year rule and when it resets

The five-year holding period is a calendar rule, not a rolling five years from each contribution. If you opened your first Roth IRA on June 15, 2019, your five-year period ends on December 31, 2024. Any may have access to withdrawal on January 1, 2025 or later meets the five-year test, even though only about 5.5 calendar years have passed.

The five-year clock applies to your Roth IRA ownership as a whole, not to individual accounts. If you have multiple Roth IRAs, they all share the same five-year start date. Opening a second Roth IRA does not restart the clock.

If you convert a traditional IRA to a Roth IRA, that conversion has its own separate five-year rule for the converted amount. Earnings on a conversion are subject to a different five-year holding period than your regular contributions. This matters if you convert and then need to withdraw before five years have passed—the converted amount may be subject to the 10% penalty even if your original Roth contributions would not be.

State and local taxes on Roth IRA withdrawals

While the federal government does not tax may have access to Roth withdrawals, some states and cities do tax retirement income. The treatment varies widely. A handful of states—including Pennsylvania, Illinois, and Mississippi—do not tax retirement income at all. Others tax it at the same rate as wages. A few states tax only certain types of retirement income.

If you live in a state that taxes retirement income, a may have access to Roth withdrawal will likely be taxable at the state level even though it is not taxable federally. You would report it on your state tax return. If you move to a different state after retiring, the tax treatment of withdrawals you take in your new state depends on that state's rules, not where the account was opened or where you lived when you contributed.

Check your state's tax department website or speak with a tax preparer familiar with your state's rules before taking large withdrawals, especially if you are near a state border or planning to relocate.

Nonqualified withdrawals and the tax bill

A nonqualified withdrawal is any withdrawal that does not meet both the age 59½ and five-year requirements. When you withdraw earnings this way, those earnings are taxed as ordinary income in the year of withdrawal. You report the taxable amount on your federal tax return, and it is added to your other income for the year.

The 10% penalty is calculated on the earnings portion only and is reported separately on Form 5329. If you fall into an exception category (disability, first-time home purchase, etc.), you still owe the income tax but can avoid the penalty by filing Form 5329 and claiming the exception.

Nonqualified withdrawals do not affect your ability to make future contributions or conversions. The withdrawal itself does not reduce your contribution room for the current year or future years.

Roth conversions and the tax treatment of converted funds

When you convert money from a traditional IRA or 401(k) to a Roth IRA, you pay income tax on the converted amount in the year of conversion. That tax is due whether or not you withdraw the money later. Once the tax is paid and the money is in the Roth, future growth is tax-free.

Converted funds are subject to their own five-year holding period before you can withdraw them penalty-free. If you convert $50,000 in 2024 and withdraw it in 2025, the withdrawal is nonqualified and subject to the 10% penalty, even if your original Roth contributions have been in the account for more than five years. The five-year rule for conversions runs separately from the five-year rule for regular contributions.

This matters for strategies like "backdoor Roth" conversions, where you contribute to a traditional IRA and immediately convert it to a Roth. You pay tax on the conversion in the year it happens, but if you need the money back within five years, the 10% penalty applies to the converted amount.

Frequently Asked Questions

Can I withdraw my contributions without paying tax or penalty?

Yes. Your contributions can be withdrawn at any time, at any age, tax-free and penalty-free. The five-year rule and age 59½ requirement do not apply to contributions, only to earnings. You can pull out what you put in whenever you need it.

What happens if I withdraw earnings before age 59½?

The earnings are taxed as ordinary income and subject to a 10% penalty, unless you fall into an exception (disability, first-time home purchase, medical expenses, etc.). Exceptions waive the penalty but not the income tax. Your contributions can still come out tax and penalty-free.

Does the five-year rule apply to each Roth IRA separately?

No. The five-year clock starts when you open your first Roth IRA and applies to all your Roth IRAs together. Opening a second or third Roth account does not restart the clock. However, conversions have their own separate five-year holding period.

Do I owe state income tax on a may have access to Roth withdrawal?

It depends on your state. Some states do not tax retirement income at all. Others tax it like regular income. Check your state's tax rules or speak with a tax preparer to know what you owe where you live.

If I convert a traditional IRA to a Roth, when can I withdraw it without penalty?

Converted funds have their own five-year holding period starting the year of conversion. If you withdraw before five years have passed, the converted amount is subject to the 10% penalty. Your original Roth contributions remain accessible penalty-free at any time.