Roth IRA Withdrawal Tax Free

One of the biggest benefits of having a Roth IRA is that a qualified Roth IRA withdrawal is tax free. Below is information on Roth IRA withdrawals that are tax free and Roth IRA withdrawals that are not tax free.

What Roth IRA withdrawal is tax free?

Only qualified Roth IRA withdrawal amounts are tax free and are not required by the IRS to be included in gross income.

What are qualified Roth IRA withdrawals?

Qualified Roth IRA withdrawals are any payments or distributions or withdrawals from Roth IRA accounts that meet the following requirements.

• The Roth IRA withdrawal is made after the 5 year period beginning with the first taxable year for which a Roth IRA contribution was made into a Roth IRA that is set up for the benefit of the taxpayer, and

• The Roth IRA payment or withdrawal is:
  • made on or after the date the taxpayer reaches age 59½

  • made because the taxpayer is disabled

  • made to a beneficiary or to the taxpayer's estate after his or her death or

  • one that meets the requirements that are exempt from early withdrawal penalties

Roth IRA withdrawals that are exempt from taxation

There are other Roth IRA withdrawals that are tax free up to a $10,000 lifetime limit. Below is a list of Roth IRA withdrawals that are tax free in addition to the Roth IRA tax free distributions rules above. Even Roth IRAs are subject to the age 59½  rules unless the withdrawal is classified under the followings.

• the taxpayer has unreimbursed medical expenses that are more than 7.5% of adjusted gross income

• the Roth IRA withdrawals are not more than the cost of the taxpayer's medical insurance

• the taxpayer is disabled

• the taxpayer is the beneficiary of a deceased Roth IRA owner

• the taxpayer is receiving withdrawals in the form of an annuity

• the withdrawals are not more than the taxpayer's qualified higher education expenses

• the taxpayer uses the Roth IRA withdrawals to buy, build, or rebuild a first home

• the Roth IRA withdrawal is due to an IRS levy of the qualified plan

• the Roth IRA withdrawal is a qualified reservist distribution