Roth IRA Rules for Withdrawal for Buying a House

by Jane Meggitt

Roth individual retirement accounts allow contributors to invest after-tax money, and the eventual withdrawals are tax-free. Unlike traditional IRAs, contributions to Roth IRAs are not tax-deductible, and the ability to contribute depends on the taxpayer's adjusted gross income limits. Although withdrawals of earnings before the account owner reaches the age of 59 1/2 are subject to Internal Revenue Service penalties, exceptions are made if the account owner is buying a first home.

Roth IRA Contribution Limits

As of publication, individuals meeting the adjusted gross income levels may contribute up to $5,000 annually to a Roth IRA if they are younger than 50. Those older than 50 may contribute up to $6,000, assuming that in both cases the individual has at least that much in earned income. As of publication, the AGI limit for a single filer is $107,000 or less to qualify for the full Roth IRA contribution, and between $107,000 and $122,000 to make a partial contribution. Single filers with an AGI over $122,000 cannot contribute. Married couples filing jointly have an AGI limit of $169,000 for full contributions, and between $169,000 and under $179,000 for partial contributions.


As long as the owner opened the account within the previous five years, he can take tax-free withdrawals from Roth IRAs at age 59 1/2. Unlike traditional IRAs, which requires mandatory distributions by the age of 70 1/2, Roth IRA owners never have to make withdrawals. Roth IRA owners may continue to make contributions past the age of 70 1/2 if they are earning income, unlike traditional IRAs. Any withdrawals of earnings before the age of 59 1/2 are subject to ordinary income tax, as well as a 10-percent penalty on withdrawn amount. Roth IRA owners can withdraw their contributions at any time without penalty.

First-Time Home Purchase

IRS regulations allow first-time home buyers to withdraw funds from a Roth IRA without paying the 10-percent penalty, although any earnings are still subject to ordinary income tax. Depending on how much you take out, you may not owe any tax at all if you are only tapping your contributions. To qualify for this exemption, it must be a first-time home purchase for both the account owner and spouse. The withdrawals may be used for the purchase or building costs of the first residence, as well as settlement fees, closing costs and financing.

Other Penalty Exemptions

Certain other reasons for early Roth IRA withdrawals are also exempt from the 10 percent penalty. These include higher-education expenses for the account owner, spouse, or children; medical expenses above the 7.5 percent of the owner's AGI; and legal disability of the owner.