dmertz
Level 15

Retirement tax questions

If the distribution from the Roth 401(k) would have been a qualified distribution (you met the 5-year holding period and you were age 59½ or over), the entire amount rolled over to the Roth IRA is treated as contribution basis in the Roth IRA,  However, given that this question is related to a first-time homebuyer, it seems that you have not yet reached age 59½, so only the contribution basis in the Roth 401(k) rolled over to the Roth IRA would become contribution basis in the Roth IRA.

 

Unless you made a contribution to a Roth IRA for some year prior to 2016, you have not yet completed the 5-year holding period for the Roth IRA, so any distribution of earnings in 2020 to which you apply the first-time homebuyer exception would exempt you from the 10% early-distribution penalty but not from the income tax on the earnings.  If the rollover of the Roth 401(k) to the Roth IRA established your first Roth IRA, the 5-year Roth IRA holding period began on January 1 of the year that the rollover was deposited into the Roth IRA.  If that was in 2016, distributions of earnings from the Roth IRA to which the first-time homebuyer exception will be applied will also be tax free if distributed in 2021 or later.