How Much Can I Withdraw From My IRA Without Paying Taxes?

An Individual Retirement Arrangement (IRA) is a tax-advantaged savings tool. When you take money out of this account, it’s known as a withdrawal or distribution. Whether these withdrawals are taxed depends on the type of IRA you own and the circumstances of the withdrawal. The tax implications are based on your actions both when you put money into the account and when you take it out.

Tax-Free Withdrawals from a Roth IRA

A Roth IRA is funded with after-tax dollars, meaning you have already paid income tax on your contributions, which results in more favorable tax treatment on withdrawals. For withdrawal purposes, the funds in a Roth IRA are separated into two categories: your direct contributions and the investment earnings that have accumulated over time.

When you withdraw from a Roth IRA, an IRS ordering rule dictates that your contributions are always withdrawn before any earnings. You can withdraw these contributions at any time and for any reason, completely free of taxes and penalties. For example, if you contributed $30,000 and the account grew to $45,000, you can withdraw that initial $30,000 without any tax consequences.

Accessing the investment earnings tax-free requires meeting more specific criteria. A withdrawal of earnings is only considered a “qualified distribution” if two conditions are met. First, you must satisfy the 5-year holding period, which begins on the first day of the tax year for which you made your first contribution to any Roth IRA. Second, the withdrawal must meet a specific triggering event, such as reaching age 59½, becoming totally and permanently disabled, or for the death of the account owner.

A special exception exists for a first-time home purchase, allowing for a tax-free withdrawal of up to a $10,000 lifetime maximum from earnings, provided the 5-year rule has been met. If you take a distribution of earnings that does not meet these requirements, it is considered a non-qualified distribution. The earnings portion of the withdrawal would be subject to ordinary income tax and potentially a 10% early withdrawal penalty if you are under age 59½.

The Taxable Nature of Traditional IRA Withdrawals

Withdrawals from a Traditional IRA are treated differently because contributions are often made with pre-tax dollars, for which you may have received a tax deduction. As a result, distributions from a Traditional IRA are fully taxable as ordinary income. The amount you withdraw is added to your other income for the year and taxed at your corresponding federal and state income tax rates.

The primary exception is if you have made non-deductible contributions to your Traditional IRA. This can occur when your income is too high to qualify for the tax deduction. These non-deductible contributions create a “basis” in your IRA, representing the after-tax money in the account. You cannot, however, choose to withdraw only this non-taxable basis.

Instead, you must use the “pro-rata rule” to determine the non-taxable portion of any withdrawal. This rule requires you to calculate the ratio of your after-tax basis to the total value of all your Traditional, SEP, and SIMPLE IRAs. The resulting percentage is the portion of your withdrawal that is a tax-free return of your basis.

For example, assume you have $10,000 in non-deductible contributions (your basis) and the total value of all your Traditional IRAs is $100,000. In this case, 10% of any withdrawal would be tax-free. If you were to withdraw $20,000, then $2,000 would be received tax-free, and the remaining $18,000 would be taxable income. This calculation must be reported to the IRS using Form 8606, which is also used to track your cumulative basis.

Qualified Charitable Distributions

A Qualified Charitable Distribution (QCD) is a method for moving money out of an IRA to a charity without it being counted as taxable income. This is a direct transfer of funds, not a withdrawal for personal use. To be eligible to make a QCD, the IRA owner must be at least 70½ years old on the day of the distribution.

The money must be transferred directly from the IRA custodian to a qualified 501(c)(3) organization. You cannot receive the money first and then make the donation; the check must be made payable to the charity. This direct transfer allows the distribution to be excluded from your taxable income.

The annual limit on the amount you can exclude from income via QCDs is indexed for inflation, and for 2025, it is $108,000 per person. A QCD can also be used to satisfy your annual Required Minimum Distribution (RMD), which is the amount you must withdraw from your Traditional IRA each year after you reach age 73. Using a QCD to fulfill your RMD means you avoid recognizing that distribution as income, which can help lower your adjusted gross income (AGI).