You can withdraw contributions (not earnings) from a Roth IRA at any time without penalty, but using it to buy a house involves specific rules that depend on whether you've had the account open for five years and whether you're a first-time buyer

A Roth IRA is designed for retirement, not homebuying. The IRS does allow you to take money out early in certain situations, but the rules are strict. If you withdraw earnings before age 59½, you'll owe income tax and a 10% penalty on those earnings — unless you meet a narrow exception. The first-time homebuyer exception lets you withdraw up to $10,000 in earnings penalty-free (though you still owe income tax), but only if you've owned the account for at least five tax years.

Your contributions — the money you put in yourself — can always come out without penalty or tax, at any age. But if you've been investing those contributions, the growth counts as earnings and is subject to the rules above. Many people confuse contributions with earnings and end up owing taxes they didn't expect.

Key Takeaways

  • You can withdraw your own contributions from a Roth IRA at any time without tax or penalty, regardless of your age or reason.
  • The first-time homebuyer exception allows you to withdraw up to $10,000 in earnings penalty-free if you've held the account for at least five tax years, though you'll still owe income tax on those earnings.
  • Earnings withdrawn before age 59½ without meeting the homebuyer exception trigger both income tax and a 10% penalty.
  • The IRS defines a first-time homebuyer as someone who has not owned a home in the past two years, which includes people buying again after a long gap.

The difference between contributions and earnings in your Roth IRA

Your Roth IRA holds two types of money: what you put in (contributions) and what your investments earned (earnings). The IRS treats them differently when you withdraw.

Contributions are always yours to take out. If you deposited $5,000 per year for five years, you have $25,000 in contributions. You can withdraw that $25,000 tomorrow for any reason — buying a house, paying medical bills, anything — with no tax and no penalty. The IRS doesn't care because you already paid income tax on that money when you earned it.

Earnings are the gains your money made while invested. If your $25,000 in contributions grew to $30,000, that $5,000 in growth is earnings. Withdrawing earnings before age 59½ normally costs you income tax plus a 10% penalty. The homebuyer exception removes the penalty but not the income tax.

To know how much of your balance is contributions versus earnings, check your Roth IRA statement or contact your account provider. They can give you a breakdown. The IRS also tracks this through Form 8606, which you file with your tax return.

The first-time homebuyer exception: what it covers and what it doesn't

The IRS allows you to withdraw up to $10,000 in earnings from your Roth IRA penalty-free if you're buying a home for the first time. This is a lifetime limit, not an annual one — you get $10,000 total across your entire life, not $10,000 per year.

To use this exception, you must meet three conditions. First, you must be a first-time homebuyer, which the IRS defines as someone who has not owned a principal residence during the two-year period ending on the date of purchase. This includes people who owned a home years ago but haven't owned one in the past two years. Second, you must have held your Roth IRA for at least five tax years. This means if you opened the account in 2020, you can't use the exception until 2025. Third, you must use the money to buy, build, or rebuild a home that will be your principal residence.

The $10,000 limit applies to the total you withdraw across all your Roth IRAs combined. If you have two Roth IRAs and withdraw $6,000 from one and $5,000 from the other, you've used your full $10,000 lifetime allowance.

You still owe income tax on the earnings you withdraw, even though you avoid the 10% penalty. If you withdraw $10,000 in earnings and you're in the 22% tax bracket, you'll owe $2,200 in federal income tax, plus any state income tax. This is a significant cost that many people overlook.

The five-year rule and how it affects your withdrawal

The five-year rule is not about your age — it's about how long you've owned the account. The clock starts on January 1 of the year you open your Roth IRA, not on the day you open it.

If you opened your Roth IRA on December 31, 2020, the five-year period runs from January 1, 2020 through December 31, 2024. You can use the homebuyer exception starting in 2025. If you opened it on January 1, 2021, the five-year period runs from January 1, 2021 through December 31, 2025, and you can use the exception starting in 2026.

This rule applies only to the homebuyer exception. Your contributions can come out anytime, regardless of how long you've owned the account. But if you want to withdraw earnings without penalty, you must have held the account for five tax years.

What happens if you withdraw earnings without meeting the exception

If you withdraw earnings before age 59½ and you don't meet the homebuyer exception (or you exceed the $10,000 limit), you owe both income tax and a 10% penalty on those earnings.

The 10% penalty is calculated on the earnings only, not on your contributions. If you withdraw $15,000 and $5,000 of that is earnings, the penalty is 10% of $5,000, which is $500. You also owe income tax on the full $5,000 in earnings at your ordinary tax rate.

Your Roth IRA provider will withhold 20% of the withdrawal for federal taxes, but this is just an estimate. When you file your tax return, you may owe more or receive a refund depending on your actual tax situation. The penalty is separate and is reported on Form 5329.

Other ways to access retirement savings for a home purchase

If your Roth IRA doesn't have enough contributions, or if you don't meet the homebuyer exception, other retirement accounts offer different rules. A traditional IRA also allows a $10,000 lifetime withdrawal for first-time homebuyers, but the withdrawal is fully taxable as income (there's no distinction between contributions and earnings). A 401(k) or 403(b) may allow you to borrow against your balance rather than withdraw it, which means you repay the money with interest and avoid taxes and penalties.

Some employers offer hardship withdrawals from 401(k) plans for homebuying, though this varies by plan. You would need to check your plan documents or ask your employer's benefits administrator. Borrowing from a 401(k) is often cheaper than withdrawing, because you're repaying yourself rather than losing the money to taxes.

If you're not yet 59½ and you don't have enough in contributions, consider whether waiting a few years to save more is realistic. Withdrawing retirement money early costs you decades of compound growth. A $10,000 withdrawal at age 35 might have grown to $50,000 or more by age 65, depending on your investment returns.

How to actually withdraw the money from your Roth IRA

Contact your Roth IRA provider — the bank, brokerage, or investment company holding your account — and tell them you want to withdraw funds for a first-time homebuyer purchase. They will ask for documentation: usually a signed purchase agreement or a letter from your real estate agent or lender stating that you're buying a home.

The provider will process the withdrawal and send you a check or transfer the funds to your bank account. This typically takes three to five business days. They will also send you a Form 1099-R, which reports the withdrawal to the IRS. You'll need this form when you file your tax return.

On your tax return, you'll report the withdrawal on Form 8606 and Form 5329 (if applicable). If you're claiming the homebuyer exception, you'll note that on Form 5329 to show the IRS why you're not paying the 10% penalty. Your tax software or tax preparer can walk you through this, but it's important to get it right — missing the exception can cost you hundreds in unexpected penalties.

Frequently Asked Questions

Can I withdraw from my spouse's Roth IRA to buy a house together?

No. The homebuyer exception applies only to your own Roth IRA. Your spouse can withdraw from their own account if they meet the conditions, but you cannot access their money. Each person's $10,000 lifetime limit is separate.

What if I've already used my $10,000 homebuyer exception once?

You cannot use it again. The $10,000 limit is a lifetime allowance across all Roth IRAs you own. If you withdrew $10,000 for a home purchase ten years ago, you cannot withdraw earnings penalty-free for another home purchase, even if you've since sold the first home.

Do I have to report the withdrawal to my lender?

Yes. Mortgage lenders ask where your down payment money is coming from. A Roth IRA withdrawal is a legitimate source and lenders are familiar with it. You'll need to provide documentation of the withdrawal (the Form 1099-R or a statement from your provider) to show the funds are yours and not a loan you have to repay.

What if I'm under 59½ and I withdraw contributions — do I owe taxes?

No. Contributions are never taxed when you withdraw them, regardless of your age. You only owe taxes and penalties on earnings withdrawn before age 59½ (unless an exception applies). This is one of the main advantages of a Roth IRA over a traditional IRA.

Can I put the money back into my Roth IRA after I buy the house?

You cannot "undo" a withdrawal and restore your contribution room. However, you can make new contributions in future years, up to the annual limit set by the IRS (which varies by year and income). If you withdrew $10,000 and want to rebuild your account, you'd contribute new money going forward, but you don't get back the $10,000 you took out.