Can I Take a Loan From My IRA? Rollovers, Withdrawals, and Exceptions

You cannot take an IRA loan. Federal law contains no loan provision for traditional IRAs, Roth IRAs, SEP-IRAs, or SIMPLE IRAs, and attempting to borrow from your own account is treated as a prohibited transaction that can disqualify the entire IRA. If you need cash, your real options are a 60-day rollover, a penalty-free withdrawal under one of the statutory exceptions, or, for Roth holders, pulling out your own contributions.

Why No IRA Allows Loans

The section of the Internal Revenue Code that governs IRAs, 26 U.S.C. § 408, simply has no mechanism for participant loans.¹ This is the fundamental difference between an IRA and a 401(k): a workplace plan may permit borrowing against your balance, but an IRA cannot, no matter what your custodian or employer sponsors.

If you or a beneficiary borrows money from an IRA, the account loses its tax-advantaged status as of the first day of the year the borrowing occurred.² Once the IRA is disqualified, the entire balance, not just the amount you took, becomes taxable income for that year.³ Under age 59½, you add the 10% early distribution penalty on top.

Using an IRA as collateral produces the same result for the pledged portion: that share is treated as if distributed to you and becomes taxable.² Setting up a “loan” arrangement with yourself, complete with interest and a repayment schedule, does not change the analysis. The IRS calls it a distribution.

The 60-Day Rollover: The Closest Thing to a Loan

The tax code does offer one feature that functions like a very short, interest-free bridge. Under 26 U.S.C. § 408(d)(3), you can withdraw money from your IRA, use it for anything, and redeposit it into an eligible retirement account within 60 calendar days without triggering tax.⁴ Meet the deadline and it is a nontaxable rollover. Miss it, and the entire withdrawal becomes a permanent, taxable distribution, plus the 10% penalty if you are under 59½.⁵ The money cannot go back in after the window closes.

Two rules trip people up. First, you are limited to one IRA-to-IRA rollover in any 12-month period, and the limit applies across all your IRAs combined, not per account.⁶ A second rollover inside that window is treated as a taxable distribution that cannot be undone. Direct trustee-to-trustee transfers do not count against the limit.⁷

Second, when your custodian sends a distribution check, they will withhold 10% for federal tax by default.⁷ To complete a tax-free rollover, you have to redeposit the full original amount, including the withheld portion, from your own pocket. Withdraw $20,000 with $2,000 withheld, and you must redeposit $20,000. Whatever you cannot replace becomes a taxable distribution. If you plan to use the 60-day rollover as a bridge, opt out of withholding when you file the distribution request.

If a qualifying event, such as a bank error, hospitalization, incarceration, or disaster, caused you to miss the 60 days, you can self-certify a late rollover to the receiving institution under Revenue Procedure 2016-47 without paying the IRS a fee.⁸ The rollover must generally happen within 30 days after the obstacle clears, and the IRS can still reject the waiver on audit.

Roth IRA Contributions Come Out Anytime

Roth IRA holders have a workaround the traditional side does not. The IRS treats Roth distributions as coming out of your regular contributions first, then conversion amounts, then earnings.⁹ Because contributions were made with after-tax dollars, withdrawing them creates no taxable income and no 10% penalty at any age.

If you contributed $30,000 over the years and the account has grown to $40,000, you can take out up to $30,000 whenever you want. The ordering rule keeps your contributions in front of any taxable earnings.¹⁰ Earnings are a different story: they come out completely tax-free and penalty-free only if your first Roth contribution was at least five years ago and you are 59½ or older (or qualify for an exception like disability or a first-time home purchase). Pulling earnings before both conditions are met can trigger income tax, the 10% penalty, or both.

Penalty-Free Withdrawal Exceptions

If you are under 59½, a traditional IRA distribution normally carries income tax plus the 10% early distribution penalty.⁵ Several statutory exceptions waive the 10% but not the income tax.

First-time home purchase, up to $10,000 over your lifetime, used within 120 days to buy, build, or rebuild a principal residence for you, your spouse, child, grandchild, or parent. “First-time” means no ownership interest in a principal residence during the prior two years.¹¹
Qualified higher education expenses (tuition, fees, books, supplies, and room and board for at least half-time students) at eligible institutions for you, your spouse, children, or grandchildren.¹²
Unreimbursed medical expenses exceeding 7.5% of your adjusted gross income.¹²
Health insurance premiums while unemployed, if you received unemployment compensation for at least 12 weeks.¹²
Total and permanent disability, supported by medical evidence, meaning you cannot engage in any substantial gainful activity due to an impairment expected to result in death or last indefinitely.¹¹

SECURE 2.0 added more categories starting in 2024:

Emergency personal expenses, up to $1,000 once per calendar year, repayable within three years; skip the repayment and you must wait three years for another.¹²
Domestic abuse victims, up to the lesser of $10,500 (the 2026 inflation-adjusted limit) or 50% of the IRA balance, taken within one year of the abuse.¹³
Terminal illness, when a physician certifies a condition reasonably expected to cause death within 84 months. Repayment within three years is allowed.¹²
Birth or adoption, up to $5,000 per child within one year of the birth or finalized adoption; repayments are treated as rollover contributions.¹²
Qualified disaster recovery, up to $22,000 if you had an economic loss in a federally declared disaster area, taken within 180 days after the applicable date and generally repayable within three years.¹⁴

Substantially Equal Periodic Payments

For a larger ongoing need that does not fit the targeted exceptions, a 72(t) plan, formally called Substantially Equal Periodic Payments, lets you take a series of annual distributions calculated on your life expectancy without the 10% penalty. Once you start, the payments must continue for the longer of five years or until you reach age 59½.¹² Start at 52 and you continue until at least 59½; start at 57 and you continue for five full years, to age 62.

The trap is inflexibility. Modify the payment amount, skip a year, or stop early, and the IRS retroactively applies the 10% penalty to every distribution you have taken since the plan began, plus interest.¹¹

Inherited IRAs Are Even More Restricted

If you inherited an IRA from someone other than your spouse, the no-loan rule is joined by more limits. You cannot roll funds into or out of the inherited IRA and cannot make new contributions to it.⁹ Borrowing is still a prohibited transaction, and it would disqualify the account and make the full balance taxable at once.

Non-spouse beneficiaries generally draw the account down under a 10-year rule or on a life-expectancy schedule, depending on when the original owner died and whether the beneficiary is an “eligible designated beneficiary” such as a minor child, a disabled individual, or someone not more than 10 years younger than the deceased.¹⁵ A surviving spouse can roll the inherited IRA into their own IRA and treat it as their own.

Reporting the Withdrawal Correctly

After the year ends, your custodian issues Form 1099-R reporting the distribution to you and the IRS. Box 7 carries a distribution code that tells the IRS what happened, such as Code 1 for an early distribution with no known exception.¹⁶ Custodians often use Code 1 even when an exception applies, because they may not know your circumstances.

If Box 7 does not reflect your exception, you claim it yourself by filing Form 5329 with your tax return, entering the exception number that matches your situation (for example, 09 for a first-time home purchase or 05 for disability) and calculating the corrected penalty, often zero.¹⁷ Skip Form 5329 when it was needed and the IRS can assess the 10% penalty even though you qualified for the waiver.

1
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts
2
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts
3
Internal Revenue Service. Retirement Topics – Prohibited Transactions
4
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts – Section: Tax Treatment of Distributions
5
Internal Revenue Service. Topic No. 557 Additional Tax on Early Distributions From Traditional and Roth IRAs
6
Internal Revenue Service. Application of One-Per-Year Limit on IRA Rollovers
7
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
8
Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement
9
Internal Revenue Service. Publication 590-B Distributions From Individual Retirement Arrangements
10
GovInfo. 26 USC 408A Roth Individual Retirement Accounts
11
Office of the Law Revision Counsel. 26 USC 72 Annuities Certain Proceeds of Endowment and Life Insurance Contracts
12
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
13
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs as Adjusted
14
Internal Revenue Service. Highlights of This Issue Bulletin No. 2026-6
15
Internal Revenue Service. Retirement Topics – Beneficiary
16
Internal Revenue Service. Instructions for Forms 1099-R and 5498
17
Internal Revenue Service. 2025 Instructions for Form 5329