You can withdraw Roth IRA contributions (not earnings) anytime without penalty, and first-time homebuyers can withdraw up to $10,000 in earnings once in a lifetime

A Roth IRA lets you pull out money you put in—your contributions—at any time for any reason without tax or penalty. That makes it different from a traditional IRA, where withdrawals before age 59½ usually trigger a 10% penalty plus income tax. For a down payment, this matters because you can access your own money immediately.

The catch is earnings—the investment gains inside the account. If you're a first-time homebuyer, you can withdraw up to $10,000 in earnings one time in your life, tax-free and penalty-free. That $10,000 limit is per person, not per account, and it applies whether you're married filing jointly or single. If you're married and both spouses are first-time buyers, you can each withdraw $10,000, for $20,000 total.

You must meet the definition of "first-time homebuyer" under IRS rules: you (and your spouse, if married) cannot have owned a home in the two years before the withdrawal. That includes investment properties, vacation homes, and any real estate you held title to. If you owned a home three years ago, you may have access to now.

Key Takeaways

  • You can withdraw your Roth IRA contributions anytime without penalty or tax, regardless of your age or reason.
  • First-time homebuyers can withdraw up to $10,000 in earnings once in a lifetime, tax-free, if they haven't owned a home in the past two years.
  • The $10,000 earnings limit is per person, so a married couple where both are first-time buyers can withdraw $20,000 combined.
  • Withdrawing from a Roth IRA for a down payment reduces the money growing tax-free for retirement and may not be the best use of retirement savings.

How to tell contributions from earnings in your Roth IRA

Your Roth IRA statement shows your account balance, but it doesn't always clearly separate what you put in from what the investments earned. You need to track this yourself or ask your account custodian (the bank, brokerage, or investment firm holding your account) to calculate it.

Add up every dollar you deposited into the Roth IRA since you opened it. Include regular annual contributions, catch-up contributions if you're over 50, and any conversions from a traditional IRA (though conversions count as contributions for withdrawal purposes). Subtract that total from your current account balance. The remainder is earnings.

If your account is worth $50,000 and you contributed $35,000 over the years, your earnings are $15,000. You can withdraw the $35,000 anytime. As a first-time homebuyer, you can also withdraw up to $10,000 of the $15,000 in earnings. That leaves $5,000 in earnings untouched.

The withdrawal process and timing

Contact your Roth IRA custodian and request a withdrawal. Most custodians process this within three to five business days, though some may take longer if you need a check mailed or if the account holds illiquid investments like real estate or private equity.

You'll receive a Form 1099-R from the custodian reporting the withdrawal. If you withdrew only contributions, you report nothing on your tax return—contributions are not taxable. If you withdrew earnings as a first-time homebuyer, those earnings are also not taxable if you meet the rules. If you withdrew earnings and don't meet the first-time homebuyer definition, those earnings are taxable income for that year.

The IRS does not require you to use the money within a certain timeframe after withdrawal. You can withdraw it and hold it in a savings account for months before closing on the house. However, some mortgage lenders want to see the down payment funds "seasoned"—held in your bank account for 30 to 60 days—to confirm the money is yours and not a loan. Check with your lender about their requirements before you withdraw.

What counts as a first-time homebuyer for IRA purposes

The IRS definition is narrower than you might think. You may have access to if you (and your spouse, if married) have not owned a principal residence at any time during the two-year period ending on the date of withdrawal. A principal residence is the home you live in most of the time.

Investment properties, rental homes, vacation homes, and land do not count as principal residences. If you owned a rental property but never lived in it, you can still be a first-time homebuyer. If you owned a home you lived in, but sold it more than two years ago, you can be a first-time homebuyer now.

If you're married and filing jointly, both spouses must meet this definition. If one spouse owned a home in the past two years and the other did not, neither of you qualifies for the earnings withdrawal. You can still withdraw contributions, but not the $10,000 earnings allowance.

Comparing Roth IRA withdrawals to other down payment sources

A Roth IRA withdrawal is not a loan—you don't repay it. That makes it different from a 401(k) loan, where you borrow from your own account and pay yourself back with interest. It also means you lose the tax-free growth on the money you withdraw for the rest of your working life.

If you're 30 years old and withdraw $10,000 from your Roth IRA, that $10,000 could grow to roughly $40,000 by age 65 (assuming 5% annual returns). Withdrawing it now costs you that future growth. A down payment from savings or a gift from family does not have this cost because it was never meant for retirement.

Other sources to consider: a gift from a family member (many lenders allow this with a gift letter), a down payment assistance program through your city or state, a lower down payment with mortgage insurance (if you can afford the higher monthly payment), or delaying the purchase until you save more. Each has different costs and trade-offs.

Tax reporting and what happens if you make a mistake

When you withdraw contributions from a Roth IRA, you don't report anything special on your tax return. The custodian sends you a Form 1099-R, and you keep it for your records. No tax is owed.

If you withdraw earnings as a first-time homebuyer and you meet all the rules, the earnings are also not taxable. The Form 1099-R will show the withdrawal, but you report it as a may have access to distribution and owe no tax.

If you withdraw earnings and you don't meet the first-time homebuyer definition—for example, you owned a home 18 months ago—those earnings are taxable as ordinary income in the year of withdrawal. You'll owe income tax on them at your regular tax rate, plus a 10% early withdrawal penalty. If you withdrew $10,000 in earnings and your tax rate is 22%, you'd owe $2,200 in tax plus $1,000 in penalty, leaving you $6,800 of the $10,000.

If you realize after withdrawal that you don't meet the rules, you can recontribute the earnings within 60 days to undo the withdrawal (called a rollover). This stops the tax and penalty from applying. You must recontribute the full amount; partial rollovers don't work. After 60 days, the tax and penalty are locked in.

Roth IRA conversions and down payment withdrawals

If you converted money from a traditional IRA to a Roth IRA in the past, those conversions count as contributions for withdrawal purposes. You can withdraw converted amounts anytime without penalty, though they may be taxable depending on when you converted and whether you have other traditional IRAs.

The five-year rule applies to earnings from conversions: you must wait five years from the conversion date before withdrawing those earnings penalty-free, even if you're over 59½. If you converted $20,000 in January 2023 and the account grew to $25,000 by January 2024, you can withdraw the $20,000conversion anytime, but the $5,000 in earnings is subject to the five-year rule and the 10% penalty if you withdraw before January 2028.

This matters if you're planning a conversion specifically to fund a down payment. A direct contribution to a Roth IRA is simpler: you can withdraw contributions immediately, and earnings after five years if you're a first-time homebuyer.

Frequently Asked Questions

Can I withdraw from a Roth IRA if I'm not a first-time homebuyer?

Yes, you can withdraw your contributions anytime without penalty or tax. You cannot withdraw earnings without penalty unless you meet the first-time homebuyer definition or another exception (age 59½, disability, death, or a few other narrow cases). If you withdraw earnings before age 59½ and don't meet an exception, you owe a 10% penalty plus income tax on the earnings.

What if I'm married and only one of us is a first-time homebuyer?

Both spouses must meet the first-time homebuyer definition to use the $10,000 earnings withdrawal. If one spouse owned a home in the past two years, neither of you can withdraw earnings. You can each withdraw your own contributions, but not the earnings allowance. If you're buying together, you may want to delay until both of you meet the definition, or use only the contributions.

Do I have to use the money within a certain time after I withdraw it?

No. The IRS does not require you to use the money for the down payment within any timeframe. However, your mortgage lender may require the funds to be "seasoned" in your bank account for 30 to 60 days before closing to verify they are yours. Ask your lender about their requirements before you withdraw.

Can I put the money back into my Roth IRA after I use it for the down payment?

You cannot recontribute withdrawn amounts as a regular contribution—you can only contribute up to your annual limit ($7,000 in 2024 for most people, $8,000 if you're 50 or older). You could convert money from a traditional IRA back into the Roth, but that creates a new conversion with its own five-year rule for earnings. Once you withdraw from a Roth IRA, the money is gone from that account unless you recontribute within your annual limits.

What if I withdraw earnings and later find out I don't may have access to as a first-time homebuyer?

You have 60 days from the withdrawal to recontribute the full amount (including earnings) back into the Roth IRA. This is called a rollover and it undoes the withdrawal for tax purposes. After 60 days, you cannot undo it, and you'll owe income tax and a 10% penalty on the earnings. If you're unsure about your status, ask the IRS or a tax professional before you withdraw.