You cannot borrow from an IRA. Unlike a 401(k), an IRA has no loan provision, so there is no way to take money out and pay yourself back with interest. The closest workaround is the 60-day indirect rollover: you withdraw funds, use the cash for up to 60 days, and redeposit the full amount into an eligible retirement account before the deadline. Do it correctly and the transaction is tax-free. Miss the window and the IRS treats every dollar you didn’t return as a taxable distribution, plus a 10% early withdrawal penalty if you’re under 59½.
How the 60-Day Rollover Works
An indirect rollover lets you pull cash from your IRA and hold it personally for up to 60 calendar days. The IRS doesn’t care what you do with the money during that window, only that the full amount lands back in an eligible retirement account before day 60.1Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions The countdown starts the day you receive the distribution, not the day you request it.2Internal Revenue Service. Retirement Plans FAQs Regarding IRAs
Redeposit every dollar on time and the transaction is tax-free. You still report the distribution on your return, but you show zero taxable income from it. The key word is “every dollar.” If you take out $10,000 and only put back $9,000, that missing $1,000 becomes taxable income and may trigger the early withdrawal penalty.1Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
The Once-Per-Year Limit
You can only complete one indirect rollover across all of your IRAs in any 12-month period. The IRS aggregates every Traditional, Roth, SEP, and SIMPLE IRA you own and treats them as a single account for this rule.3Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions – Section: IRA One-Rollover-Per-Year Rule The clock runs on a rolling 365-day window from the date of your previous distribution, not a calendar year.
Break the rule and the second distribution is taxed as ordinary income even if you redeposit it on time, and you may also owe the 10% penalty. Direct trustee-to-trustee transfers between institutions don’t count against the limit, and neither do Roth conversions.4Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions – Section: The One-Per Year Limit Does Not Apply To
Watch Out for Automatic Withholding
This is where most people get burned. When your custodian processes the distribution, federal rules require them to withhold 10% for income taxes unless you specifically elect out on the distribution request form. Take out $20,000 without electing zero withholding and you’ll receive only $18,000. But the IRS still expects the full $20,000 back within 60 days to keep the rollover tax-free.
That means finding the missing $2,000 from other funds. If you can’t, the $2,000 shortfall becomes a permanent distribution subject to income tax and possibly the penalty. You’ll get credit for the withheld amount at tax filing, but that timing doesn’t help you meet the deadline. The fix: on the distribution request form, elect zero federal and state withholding so the full amount comes to you.
What It Costs If You Don’t Put the Money Back
If the money doesn’t make it back in time, two things happen. The entire unreturned amount gets added to your gross income for the year, and if you’re under 59½, the IRS tacks on a 10% early withdrawal penalty.5Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
The income tax bite can be steep because the distribution stacks on top of your other earnings and can push you into a higher bracket. Combined with the 10% penalty and state income tax, a failed rollover can cost 30% to 45% of the amount you withdrew.
Penalty Exceptions If You’re Under 59½
If you end up unable to return the funds, income tax on the full amount is unavoidable, but the 10% early withdrawal penalty has a long list of exceptions. These waive the penalty only; the income tax still applies.6Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
- First-time homebuyer, up to a $10,000 lifetime cap, for a primary residence for you or certain family members
- Qualified higher education expenses for you, your spouse, children, or grandchildren
- Unreimbursed medical expenses to the extent they exceed 7.5% of your adjusted gross income
- Health insurance premiums while unemployed, if you received unemployment compensation for at least 12 weeks
- Total and permanent disability of the account owner
- Birth or adoption expenses, up to $5,000 per child
SECURE 2.0 added two more exceptions starting in 2024. Domestic abuse victims can withdraw up to $10,000 (indexed for inflation) or 50% of the vested balance, whichever is less, and can repay within three years as a tax-free rollover.7Internal Revenue Service. Notice 2024-55 – Certain Exceptions to the 10 Percent Additional Tax A separate emergency personal expense provision allows up to $1,000 per year for unforeseeable needs, with a three-year repayment window before you can take another.
You claim any penalty exception by filing Form 5329 with your tax return and entering the appropriate exception code.8Internal Revenue Service. 2025 Instructions for Form 5329
If You Miss the 60-Day Deadline
The IRS has two ways to get relief if you miss the deadline through no fault of your own. Knowing about them before you need them matters, because doing nothing makes the tax hit permanent.
Self-Certification
Revenue Procedure 2020-46 lets you self-certify by writing a letter to your IRA custodian explaining why you missed the deadline. No advance IRS approval is required. The custodian accepts the late rollover, and the IRS can audit it later.9Internal Revenue Service. Revenue Procedure 2020-46 You must make the contribution as soon as the reason for missing the deadline no longer prevents you.
The IRS recognizes 12 specific reasons, including a financial institution error, a distribution check that was misplaced and never cashed, depositing money into an account you mistakenly believed was eligible, serious illness or death in the family, severe damage to your principal residence, postal error or incarceration, and distributions sent to a state unclaimed property fund.9Internal Revenue Service. Revenue Procedure 2020-46
Private Letter Ruling
If your reason doesn’t fit any of the 12, you can ask the IRS for a private letter ruling waiving the deadline. The user fee is $10,000, requests are worked in the order received, and there’s no guaranteed timeline.10Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement For most people, self-certification is the practical route.
If You Have a Roth IRA, You May Not Need a Rollover at All
Before going through the 60-day process, check whether your IRA is a Roth. You can withdraw your own Roth contributions at any time, at any age, without tax or penalty, because those dollars were already taxed. There’s no deadline to beat and no once-per-year limit.
This applies only to contributions, not to earnings the account has generated. Withdrawing earnings before age 59½ and before the account has been open five years is generally subject to income tax and the 10% penalty. The IRS applies an ordering rule that treats contributions as coming out first, so if your Roth balance exceeds your total contributions, you have room to take cash without touching earnings.
Situations Where the Rollover Doesn’t Apply
Inherited IRAs (Non-Spouse)
If you inherited an IRA from someone who wasn’t your spouse, the 60-day rollover is off the table entirely. Non-spouse beneficiaries must move inherited IRA assets by direct trustee-to-trustee transfer. If you receive a check, that money is taxable as ordinary income and cannot be deposited back into an inherited IRA after the fact. A surviving spouse who is the sole beneficiary has more flexibility and can roll the inherited IRA into their own IRA, after which the normal rules apply.11Internal Revenue Service. Retirement Topics – Beneficiary
SIMPLE IRAs in the First Two Years
SIMPLE IRAs are restricted during the first two years of your participation in the employer plan. In that window you can only roll into another SIMPLE IRA. Move the money to a Traditional IRA or other account before the two-year mark and the IRS treats it as a distribution, with the early withdrawal penalty jumping from 10% to 25%.12Internal Revenue Service. SIMPLE IRA Withdrawal and Transfer Rules After two years, SIMPLE IRAs follow the standard rollover rules.
Steps to Complete a 60-Day Rollover
If you’ve weighed the risks and decided to go ahead, the practical sequence looks like this:
- Confirm you haven’t completed an indirect IRA rollover in the past 12 months. If you have, a second one will be taxed regardless of timing.
- Contact your custodian and complete a distribution request form, specifying the exact dollar amount. Elect zero federal and state tax withholding so you receive the full amount.
- Mark the redeposit deadline on your calendar. Your 60-day clock starts the day you receive the funds. Build in a few days of cushion for processing time.
- Deposit the full amount back into an eligible IRA or other retirement account. Label the transaction as a “60-day rollover” on the deposit slip or transfer memo so your custodian doesn’t code it as a regular annual contribution.
- Keep your distribution confirmation, bank statements, and correspondence. The receiving institution will report the rollover on Form 5498 and the distributing institution will issue Form 1099-R.13Internal Revenue Service. Form 5498 IRA Contribution Information
Wire transfers are faster than checks and reduce the risk of missing the deadline, though your custodian may charge a fee. If you receive a physical check, deposit it promptly. A check sitting in a drawer is the most common reason people miss the 60-day window, and one of the hardest to self-certify around after the fact.