Roth IRA Earnings & Withdrawal Rules The Roth IRA earnings you withdraw are tax-free at any age if both of these rules apply: You've had the Roth IRA for at least five years. You qualify for one of these exceptions: You used the money for a first-time home purchase up to the $10,000 lifetime limit.

Contribute to an IRA. You can defer paying income tax on up to $6,000 that you deposit in an individual retirement account. A worker in the 24% tax bracket who maxes out this account will reduce his federal income tax bill by $1,440. Income tax won't apply until the money is withdrawn from the account.

To discourage the use of IRA distributions for purposes other than retirement, you'll be assessed an additional 10% tax on early distributions from traditional and Roth IRAs, unless an exception applies. Generally, early distributions are those you receive from an IRA before reaching age 59½.

All of this simply means that a large amount of non-deductible IRA contributions are being taxed twice once at the time of the contribution (since the contribution is made with after-tax dollars) and then at the time of the distribution (since without a record of basis, all distributions are assumed to be taxable).

CALIFORNIA. IRA distributions are subject to state withholding at 1.0% of the gross payment, unless the IRA owner elects no state withholding.

Who's considered a 'first-time' homebuyer While IRA withdrawals before age 59½ usually trigger a 10 percent penalty, there are exceptions including the first-time homebuyer exemption. ... You can also qualify for the exemption if you're helping your spouse, child, grandchild or parent buy a home.

Whether you generate a short-term or long-term gain in your IRA, you don't have to pay any tax at all until you take the money out of the account. The negative is that all contributions and earnings you withdraw from an IRA, even profits from long-term capital gains, are taxable as ordinary income.