Can You Take a Loan from an IRA? Rollovers and Withdrawal Options

You cannot take an IRA loan. The IRS prohibits borrowing from any traditional, Roth, SEP, or SIMPLE IRA, and if you try — including by pledging the account as collateral — the agency treats the entire IRA as distributed to you, triggering income tax on the full balance and, if you’re under 59½, a 10% early withdrawal penalty on top.¹ What federal law does allow is a narrow workaround called the 60-day rollover, plus a handful of penalty-free withdrawal exceptions. Each has strict rules, and missing the mechanics is expensive.

Why the IRS Blocks IRA Loans Entirely

Federal law classifies any lending of money between an IRA and its owner as a prohibited transaction.² The consequence is severe: the account loses its tax-advantaged status as of the first day of the year the prohibited transaction occurred, and every dollar in it gets added to your taxable income for that year. If you’re under 59½, the 10% early withdrawal penalty stacks on.¹

Using your IRA as collateral for an outside loan produces the same result. Pledge any portion of the account and that portion is treated as distributed to you immediately.³ This is why the loan feature you may know from a workplace 401(k) does not exist here — Congress deliberately excluded IRAs from the loan provisions available to employer-sponsored plans.⁴

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

The nearest alternative is the 60-day rollover. You take a distribution, use the cash for whatever you need, and redeposit the full amount into an IRA within 60 calendar days. Hit that deadline and the IRS treats the whole transaction as a tax-free rollover rather than a withdrawal.³ Miss it by one day and the entire distribution becomes taxable income.

The 60-day clock starts the day you receive the funds, not the day your custodian processes the request. If a mailed check sits in your mailbox for a week, you’ve already burned seven days. Keep bank statements or delivery confirmations, because the burden of proving the timeline is on you.

When you redeposit the money, make sure the receiving institution codes the deposit as a rollover contribution rather than a regular contribution. The institution reports the deposit on Form 5498, and wrong coding creates problems at tax time.⁵ You also report the rollover on your Form 1040: the full distribution amount goes on the return, with the taxable portion marked as zero and “rollover” noted beside the entry.

The Withholding Trap

Here is where people get burned. When your IRA custodian sends you a distribution, federal law requires 10% withholding for income taxes unless you specifically elect out.⁶ Request $20,000 and you receive $18,000. The other $2,000 goes to the IRS.

To complete a tax-free rollover, you must redeposit the full $20,000 within 60 days, not the $18,000 that hit your account. That means covering the $2,000 gap from your own pocket. If you redeposit only $18,000, the missing $2,000 is treated as a taxable distribution, with the 10% early withdrawal penalty on top if you’re under 59½.⁶

Avoid this by filing Form W-4R to elect zero withholding before the distribution is processed.⁷ Submit it to your custodian at or before the distribution request. If you plan to return the money within 60 days, opting out of withholding means you actually receive the full balance and don’t have to scramble for replacement cash.

You Only Get One 60-Day Rollover Per Year

You can only do one 60-day rollover across all your IRAs in any 12-month period. It is an aggregate limit, not a per-account limit. If you own three traditional IRAs and a Roth, one rollover from any of them locks you out of another for 365 days.³ The IRS has enforced this aggregate reading consistently since 2014.⁸

Violate the limit and the second rollover fails. The redeposit is treated as an excess contribution, the original distribution becomes taxable, and a 6% excise tax on the excess can accrue every year the money stays in the account.

Missing the 60-Day Deadline

If you miss the window, the intended rollover becomes a permanent taxable distribution. The full amount is added to your income for the year, ordinary income tax applies, and the 10% early withdrawal penalty hits if you’re under 59½.⁹ Any late redeposit is treated as a regular contribution against your annual limit, potentially triggering the 6% excess contribution penalty.

There is a limited escape. Under Revenue Procedure 2016-47 (updated by Revenue Procedure 2020-46), you can self-certify to the receiving institution that your delay was caused by a specific qualifying circumstance. Those include a financial institution error, a check that was lost or never cashed, serious illness or death in your family, severe damage to your home, or the distribution being sent to a state unclaimed property fund.¹⁰

Self-certification is not an automatic waiver. You use the IRS model letter, give it to the custodian receiving the late rollover, and they accept and report the deposit as a rollover. No fee. But the IRS can review the certification on audit, and if it decides you didn’t actually qualify, you owe back taxes, penalties, and interest.¹⁰ You also need to complete the rollover as soon as the obstacle clears, which in practice means within about 30 days. “I forgot” and “I needed the money longer” are not qualifying reasons.

Roth Contributions: Cash Without the Rollover Rules

If you have a Roth IRA, you may not need the 60-day rollover at all. Roth contributions — the money you originally put in, not investment gains — can be withdrawn at any time, at any age, tax-free and penalty-free. Because those dollars were already taxed, the IRS doesn’t tax them again on the way out.

Roth distributions follow an ordering rule: contributions come out first, then conversion amounts, then earnings. If you contributed $30,000 over the years and the account has grown to $45,000, you can pull up to $30,000 without tax consequences. The age and five-year holding rules apply only when you dip into earnings above that threshold.

No 60-day deadline, no one-per-year limit, no withholding trap. If you have Roth contributions available and are considering a 60-day rollover from a traditional IRA, using the Roth funds first is almost always the less risky move.

Penalty-Free Early Withdrawal Exceptions

If you need the money and can’t return it within 60 days, several exceptions waive the 10% penalty for account owners under 59½. Income tax still applies to traditional IRA distributions, but skipping the penalty matters.

First-time home purchase: up to $10,000 in lifetime IRA distributions to buy, build, or rebuild a first home, used within 120 days. If the purchase falls through, you can redeposit within that same 120-day window.¹¹
Qualified higher education expenses for you, your spouse, your children, or grandchildren, including tuition, fees, books, and room and board.¹¹
Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income.¹¹
Health insurance premiums while unemployed, if you’ve received unemployment compensation for at least 12 consecutive weeks.
Permanent disability of the account owner.
Substantially equal periodic payments (72(t) or SEPPs), a series of roughly equal annual payments based on life expectancy. Once started, they must continue for at least five years or until you turn 59½, whichever is later.

Report the early distribution and the exception on Form 5329 with your return for the year of the withdrawal.⁹

SECURE 2.0 Emergency Withdrawals

The SECURE 2.0 Act, phased in starting 2024, added three penalty-free options that apply to IRAs. All still owe ordinary income tax on traditional IRA amounts; only the 10% penalty is waived.

Emergency Personal Expense

You can withdraw up to $1,000 per calendar year for an unforeseeable personal or family emergency without the 10% penalty. The cap is the lesser of $1,000 or the amount by which your vested balance exceeds $1,000.⁹ You have three years to repay, and if you do, it’s treated as a rollover. If you don’t repay the last one, you can’t take another until three years pass or you’ve repaid it.¹²

Domestic Abuse Survivor

Survivors of domestic abuse can withdraw the lesser of $10,500 (the 2026 inflation-adjusted limit) or 50% of the vested balance without the penalty.¹³ The withdrawal must be taken within one year of the abuse and can be repaid within three years as a tax-free rollover.¹²

Terminal Illness

If a physician certifies a condition expected to result in death within 84 months, distributions are exempt from the 10% penalty with no dollar cap. You can repay within three years if your condition improves.¹¹

If You’re Only Moving Money Between Institutions

If your real goal isn’t short-term cash but simply switching custodians, ask for a direct trustee-to-trustee transfer. The funds go straight from one institution to the other without passing through you. No withholding, no 60-day clock, and the one-per-year limit doesn’t apply.⁶ You can do as many direct transfers a year as you want, and the IRS doesn’t consider them rollovers at all. When you don’t actually need the cash in hand, this is the safe path.

1
Internal Revenue Service. Retirement Plans FAQs Regarding Loans
2
Office of the Law Revision Counsel. 26 USC 4975 – Tax on Prohibited Transactions
3
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
4
Internal Revenue Service. Retirement Topics – Loans
5
Internal Revenue Service. href=”https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions” target=”_blank” rel=”noopener”>Rollovers of Retirement Plan and IRA Distributions
6
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
7
Internal Revenue Service. Form W-4R – Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions
8
Internal Revenue Service. Announcement 2014-15 – Application of One-Per-Year Limit on IRA Rollovers
9
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
10
Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement
11
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
12
Internal Revenue Service. Notice 2024-55 – Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
13
Internal Revenue Service. Notice 25-67 – 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted