You can withdraw up to $35,000 from your Roth IRA to buy a home, but only under specific conditions and only once in your lifetime

The first-time homebuyer exception lets you take money out of your Roth IRA without the usual 10% early withdrawal penalty if you are buying your first home. The IRS allows up to $35,000 total across all your Roth IRAs (not per account). You must use the money within 120 days of withdrawal, and it must go toward may have access to acquisition costs: down payment, closing costs, inspection fees, appraisal fees, or title insurance.

This is a one-time-only rule. Once you use it, you cannot use it again, even if you sell that home and buy another one later. The $35,000 limit has been in place since 2024 and applies whether you are buying alone or with a spouse — each spouse can withdraw $35,000 if you both meet the conditions.

The catch: you still owe income tax on the earnings portion of what you withdraw. If your Roth IRA contains $50,000 in contributions and $10,000 in earnings, and you withdraw $35,000, you will owe income tax on the portion of that $35,000 that came from earnings. The IRS calculates this using a pro-rata rule across all your IRAs (both Roth and traditional). This tax bill is due when you file your return for the year you withdraw.

Key Takeaways

  • The first-time homebuyer exception allows you to withdraw up to $35,000 from your Roth IRA without paying the 10% early withdrawal penalty, but you must use the money within 120 days.
  • You owe income tax on the earnings portion of your withdrawal, calculated using the pro-rata rule if you have any traditional IRAs or other pre-tax retirement accounts.
  • This exception is a one-time-only benefit across your entire lifetime, even if you sell the home and buy another one later.
  • You must be a first-time homebuyer, which the IRS defines as someone who has not owned a home in the past two years.
  • The money must go toward may have access to acquisition costs like down payment, closing costs, or title insurance — not toward repairs, renovations, or other home-related expenses.

Who counts as a first-time homebuyer under IRS rules

The IRS definition is narrower than you might think. A first-time homebuyer is someone who has not owned a principal residence at any time during the two-year period ending on the date of purchase. This means if you owned a home and sold it two years ago, you can still use the exception. If you owned a home and sold it 18 months ago, you cannot.

The rule applies to your spouse too. If you are married and filing jointly, both you and your spouse must meet the first-time homebuyer definition. If one of you owned a home in the past two years, neither of you can use the exception — even if the other spouse has never owned a home.

Divorced or widowed people can use the exception if they meet the two-year test. If you inherited a home from a spouse, you are treated as having owned it for purposes of this rule.

How the pro-rata rule affects your tax bill

If you have both a Roth IRA and a traditional IRA (or a SEP-IRA, SIMPLE IRA, or any other pre-tax retirement account), the IRS treats them as one pool when you withdraw from your Roth. This is the pro-rata rule, and it can create a surprise tax bill.

Example: You have a Roth IRA with $40,000 in contributions and $10,000 in earnings ($50,000 total). You also have a traditional IRA with $30,000 in pre-tax contributions. Your total IRA balance across both accounts is $80,000. When you withdraw $35,000 from your Roth, the IRS calculates what portion of your total IRAs is pre-tax money: $30,000 ÷ $80,000 = 37.5%. So 37.5% of your $35,000 withdrawal ($13,125) is treated as pre-tax money and is taxable income. You owe income tax on that $13,125 at your ordinary income tax rate.

The pro-rata rule applies even if you do not touch your traditional IRA. The only way to avoid it is to have no pre-tax retirement accounts at all when you withdraw from your Roth. Some people roll a traditional IRA into a workplace 401(k) before withdrawing from their Roth, since the pro-rata rule does not count 401(k)s — but you must do this before the withdrawal, not after.

What counts as may have access to acquisition costs

The IRS has a specific list of what you can use the money for. may have access to costs include your down payment, closing costs, real estate commissions, title insurance, appraisal fees, inspection fees, surveys, and legal fees related to the purchase. You can also use it to pay off a mortgage on the property you are buying (if you are assuming an existing loan).

What does not count: repairs or renovations to the home after you buy it, property taxes, homeowners insurance, HOA fees, utility setup, or moving costs. The money must go toward the actual purchase transaction, not toward making the home livable or ready to move into.

You have 120 days from the date of withdrawal to use the money. If you withdraw on January 15 and do not close on the home until May 1, you have missed the window and the withdrawal becomes a taxable, penalized early withdrawal. The IRS does not extend this deadline.

The tax consequences you need to calculate before withdrawing

Before you withdraw, sit down with a tax professional and calculate your actual tax bill. The amount you owe depends on your income tax bracket for the year, whether you have pre-tax retirement accounts, and how much of your withdrawal is earnings versus contributions.

If you are in the 22% tax bracket and your pro-rata calculation shows $13,000 of your withdrawal is taxable, you will owe roughly $2,860 in federal income tax, plus whatever your state income tax rate is. Some states do not tax retirement withdrawals, but others do. You may also owe self-employment tax if you are self-employed, though this is rare for Roth withdrawals.

You do not have to make estimated tax payments, but you should plan to pay this bill when you file your return. If you do not, you will owe interest and penalties. Some people set aside part of the withdrawal to cover the tax bill rather than using all of it for the home purchase.

Alternatives if you cannot use the first-time homebuyer exception

If you do not meet the first-time homebuyer definition or have already used the exception, you have other options. You can withdraw your contributions (not earnings) from your Roth IRA at any time, for any reason, with no penalty and no tax. This is different from the first-time homebuyer exception — you can always access your contributions. If you contributed $50,000 to your Roth over the years and it has grown to $70,000, you can withdraw the $50,000 anytime without penalty or tax.

You can also borrow against your 401(k) if your employer plan allows it. A 401(k) loan does not count as a withdrawal, so you avoid the pro-rata rule and the tax bill. You repay the loan to yourself over time, usually five years. The downside: if you leave your job, the loan is typically due in full within 60 days or it becomes a taxable withdrawal.

A traditional IRA withdrawal for a first-time home purchase also allows up to $10,000 (not $35,000), but you owe income tax on the full amount since traditional IRA contributions are pre-tax. A Roth is almost always better if you meet the conditions.

Frequently Asked Questions

Can I withdraw my Roth IRA contributions without penalty?

Yes. You can withdraw the money you personally contributed to your Roth IRA at any time, for any reason, with no penalty and no tax. The restriction applies only to earnings and to money that was converted from a traditional IRA. Keep records of your contributions so you can prove to the IRS what portion of your account is contributions versus earnings.

What happens if I do not use the $35,000 within 120 days?

If you do not use the money for a may have access to home purchase within 120 days, the withdrawal is treated as a regular early withdrawal. You owe the 10% penalty on the full $35,000 plus income tax on the earnings portion. The 120-day clock starts the day you withdraw the money, not the day you close on the home.

Can my spouse and I each withdraw $35,000 if we are buying together?

Yes, if you are both first-time homebuyers and you each have a Roth IRA. You can each withdraw up to $35,000, for a total of $70,000. Each of you must meet the first-time homebuyer definition separately — if one spouse owned a home in the past two years, that spouse cannot withdraw, but the other spouse can if they meet the test.

Do I have to report the withdrawal to my lender?

Yes. Most lenders ask where your down payment money is coming from. A Roth IRA withdrawal is a documented source of funds. Bring your withdrawal statement from your IRA custodian. Lenders generally accept Roth withdrawals without issue since the money is yours, not a loan you have to repay.

Can I use this exception if I am buying a second home or investment property?

No. The first-time homebuyer exception applies only to your principal residence — the home you live in. A second home, vacation home, or rental property does not may have access to. The home must be for your own use, not as an investment.