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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.
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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.