Are Roth IRA Distributions Taxable or Tax-Free?

Roth IRA distributions are not taxable when you withdraw your own contributions, and they are not taxable on earnings either once your account has been open at least five tax years and you’ve reached age 59½ (or meet another qualifying event like disability or death). Pull earnings out before both of those boxes are checked and you owe ordinary income tax on the earnings portion, plus a 10% penalty if you’re under 59½. The contribution dollars you put in are always yours to take back tax-free and penalty-free, at any age, for any reason.

Your Contributions Always Come Out Tax-Free

Every dollar you contribute to a Roth IRA is money you’ve already paid federal tax on. The government took its cut when you earned it, so withdrawing those same dollars later doesn’t create a second tax event. The tax code treats your total contributions as a pool of after-tax money you can access at any time, at any age, without income tax and without the early withdrawal penalty.¹

Someone who contributed $7,500 a year for a decade has $75,000 in contributions available with zero tax consequences. That’s true whether they’re 30 or 65, and true whether the account is one year old or twenty. This is the single most important thing to understand about Roth IRA withdrawals, because it resolves most people’s actual question.

When Earnings Come Out Tax-Free

The tax-free growth is the whole point of a Roth IRA, but the earnings portion of the account is only tax-free when your withdrawal is a “qualified distribution.” That requires two things at the same time.¹

The five-year holding period. Your Roth IRA must have been open for at least five tax years, counted from January 1 of the year you made your first contribution to any Roth IRA. Open your first Roth in March 2022 and the clock started on January 1, 2022; the five-year period ends on January 1, 2027. The clock doesn’t restart when you open a second Roth or make later contributions. Only that first contribution date matters.²

A qualifying event. You need at least one of these at the time of the withdrawal:

You’re age 59½ or older.
You’re disabled, meaning unable to engage in substantial gainful activity due to a condition expected to last indefinitely or result in death.
The distribution goes to your beneficiary or estate after your death.
You’re using up to $10,000 (lifetime cap) for a first-time home purchase.³

When both conditions are satisfied, the entire withdrawal is tax-free and penalty-free, including decades of compounded growth.

What You Owe When the Withdrawal Isn’t Qualified

If your withdrawal fails either part of the qualified distribution test, the earnings portion is taxed as ordinary income at whatever federal bracket applies to your total income for the year. Rates for 2026 range from 10% to 37%.⁴ On top of the income tax, there’s a 10% additional tax on the earnings amount if you’re under 59½. The 10% penalty hits only earnings, never your contribution basis.³

Here’s why most non-qualified withdrawals still end up costing nothing. The IRS forces distributions to come out in a set order:¹

Regular contributions first. Always tax-free and penalty-free.
Converted and rollover amounts second, on a first-in, first-out basis.
Earnings last. This is the only bucket that can be taxed or penalized.

A practical example: you’ve contributed $30,000 over the years and the account is worth $45,000. Withdraw $30,000 before meeting the qualified distribution test and you owe nothing, because you haven’t reached the earnings layer yet. Withdraw the full $45,000 and the last $15,000 is earnings, taxable as income and potentially subject to the 10% penalty. The IRS aggregates all your Roth IRAs, so multiple accounts don’t change the calculation.

Exceptions That Waive the 10% Penalty (But Not the Income Tax)

Several situations let you avoid the 10% penalty on earnings withdrawn before 59½. Read this carefully: these exceptions remove the extra 10%, not the underlying income tax. If the distribution doesn’t meet the two-part qualified test, earnings are still taxed as ordinary income.

First-time home purchase, up to $10,000 lifetime. This is a per-person cap and it doesn’t reset.³
Higher education expenses for you, your spouse, or your children at an eligible institution.
Qualified birth or adoption, up to $5,000 per event, repayable to the account later.³
Unreimbursed medical expenses above 7.5% of your adjusted gross income.
Health insurance premiums while unemployed, after receiving unemployment for at least 12 consecutive weeks.
Substantially equal periodic payments taken over your life expectancy using IRS-approved methods. Once started, the schedule can’t be modified until the later of five years or age 59½ without a recapture tax on all prior penalty-free amounts.⁵
Distributions to satisfy an IRS levy.
Emergency personal expenses under SECURE 2.0, one per year up to $1,000, repayable within three years.
Domestic abuse victim distributions, up to the lesser of $10,000 (inflation-adjusted) or 50% of the account balance, repayable within three years.⁶
Federally declared disaster distributions, up to $22,000 per disaster.

Conversions Have Their Own Five-Year Clock

This is where people get burned. The five-year rule for Roth conversions is separate from the five-year rule for regular contributions, and each conversion starts its own five-year clock on January 1 of the year it happened.

Convert pre-tax Traditional IRA money to a Roth, then withdraw that converted amount before five years have passed and before reaching age 59½, and you owe the 10% penalty on the converted amount, even though you already paid income tax at the time of the conversion. The penalty applies to the taxable portion of the conversion, not just to earnings. Someone who converts $50,000 and pulls out $30,000 two years later at age 45 faces a $3,000 penalty on top of the income taxes already paid on the conversion.

After 59½, the conversion five-year rule stops mattering, because the age exception overrides it. And once any specific conversion clears its own five-year mark, that converted amount becomes penalty-free regardless of age. Each conversion runs on its own timeline.

Inherited Roth IRAs

Inherited Roth IRAs follow different rules. A surviving spouse can roll the account into their own Roth IRA and treat it as if they’d always owned it, or keep it as an inherited account with distributions over their life expectancy or under the 10-year rule.⁷

Most non-spouse beneficiaries of accounts where the owner died in 2020 or later must empty the inherited Roth IRA by the end of the tenth year after the year of death. No annual withdrawal is required within that window, but the account has to be drained by the deadline. A narrow group of “eligible designated beneficiaries” (minor children of the deceased, disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the owner) can stretch distributions over their own life expectancy.

Two things about taxability for beneficiaries. The original owner’s five-year clock carries over: if the owner hadn’t held any Roth for five tax years before death, earnings you withdraw as a beneficiary are taxable until that period is met. And the 10% early withdrawal penalty never applies to inherited account distributions, because death itself is a qualifying event.

Reporting Your Distribution

Your Roth IRA custodian sends you Form 1099-R for any year you take a distribution. Box 1 shows the total distributed. Box 7 has a distribution code:⁸

Code Q means the custodian confirmed a qualified distribution. No tax owed.
Code T means the custodian thinks you meet the age or other requirement but can’t verify the five-year holding period.
Code J is the default for any Roth distribution the custodian can’t classify as Q or T.

Code J doesn’t automatically mean you owe tax. It means the burden shifts to you to sort it out on your return.

Part III of Form 8606 is where you report Roth IRA distributions and calculate whether any portion is taxable. You list your total basis in contributions so the ordering rules get applied properly, and the form separates the tax-free contribution portion from any taxable earnings. If your withdrawal came entirely from contributions, Form 8606 will show zero taxable income even though you got a 1099-R.⁹ File the form even when nothing is taxable. Skip it and the IRS has no record that your withdrawal was basis rather than earnings, and may treat the whole distribution as taxable.

If your 1099-R shows Code J but you qualify for one of the penalty exceptions, use Form 5329 to claim it and eliminate the 10% additional tax. Line 2 is where you enter the exempt amount and the exception number.¹⁰ Without Form 5329, the IRS will assess the penalty automatically based on the code the custodian reported.

1
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
2
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs – Section: Distribution Rules
3
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts – Section: 10-Percent Additional Tax on Early Distributions
4
Internal Revenue Service. Federal Income Tax Rates and Brackets
5
Internal Revenue Service. Substantially Equal Periodic Payments
6
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
7
Internal Revenue Service. Retirement Topics – Beneficiary
8
Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
9
Internal Revenue Service. 2025 Instructions for Form 8606 – Nondeductible IRAs
10
Internal Revenue Service. 2025 Instructions for Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts