You can withdraw from your IRA without paying taxes under certain conditions, which depend on the type of IRA you have and your age:
Traditional IRA
- Withdrawals before age 59½ typically incur ordinary income tax plus a 10% early withdrawal penalty.
- After age 59½, you can withdraw any amount without penalty, but the withdrawn amount is subject to ordinary income tax because contributions were made pre-tax.
- You must start taking required minimum distributions (RMDs) at age 73, which are taxable
Roth IRA
- Contributions can be withdrawn at any time tax- and penalty-free because they were made with after-tax dollars.
- Earnings can be withdrawn tax-free only if the account has been open for at least 5 years and you are age 59½ or older (qualified distribution).
- Withdrawals of earnings before age 59½ or before the 5-year rule are subject to taxes and a 10% penalty unless an exception applies (e.g., first-time home purchase up to $10,000, disability, qualified education expenses, birth/adoption expenses).
- Roth IRA conversions must also meet a 5-year aging period to avoid penalties on withdrawal
Summary
- Traditional IRA: You pay ordinary income tax on withdrawals; no penalty after 59½.
- Roth IRA: You can withdraw contributions anytime tax-free; earnings are tax-free only if 5-year and age 59½ conditions are met.
Thus, the amount you can withdraw without paying taxes depends on whether you are withdrawing contributions (Roth IRA) or earnings (Traditional IRA or Roth IRA earnings) and your age/status regarding the 5-year rule and exceptions. If you want to avoid taxes entirely, withdrawing only Roth IRA contributions at any time is the safest option. For Traditional IRAs, all withdrawals are taxable except for return of nondeductible contributions, which are rare and require careful record-keeping. Always consider consulting a tax advisor for your specific situation.
