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If I take 30k out of my rollover Roth for a down payment for a house, what tax penalties will I have to pay
We need to get out of our rental. There are serious issues with the pipes under the house.
Answer
Roth IRA withdrawal rules allow you to take out up to $10,000 earnings tax and penalty free as long as you use them for a first-time home purchase and you first contributed to a Roth account at least five years ago.
If you withdraw more than $10,000 in earnings, you could run into issues. Typically, your financial provider will have some guidance as to any additional penalties or tax % you may need to pay on the withdrawal. If you want take out the full $30k, you may need to pay tax on $20k as well as a 10% penalty on early withdrawal. This penalty is usually held back and you are given a net payment (so $2k less). If this is the case, and you need a total of $30k, add an additional amount for the penalty & taxes so you don’t have a shortfall on cash come tax time.
This all assumes you are younger than age 59 1/2. If you are older than 59 1/2, there is no 10% penalty on early withdrawal.