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Retirement tax questions
Any amount originally contributed directly to a Roth IRA, or any amount originally contributed to a Roth 401(k) and subsequently rolled over to a Roth IRA, is contribution basis in your Roth IRA. When making a distribution from a Roth IRA, contribution basis comes out first tax- and penalty-free regardless of when you receive the distribution or what you do with the money. That's likely to be a substantial portion of your Roth IRA because you have been making Roth contributions since 2010.
Next out is your conversion basis, if any. Amounts converted to Roth from a traditional IRA or rolled over to a Roth IRA from a traditional 401(k) become conversion basis in your Roth IRA. Of your conversion basis, any amounts that were taxable at conversion or rollover come out first, tax-free but subject to penalty if you have not met the 5-year holding period for the conversion. These are followed by any amounts that were converted tax free (from after-tax basis in the traditional IRA or in the 401(k)), tax and penalty free. Finally, out comes any earnings earned either in the Roth IRA, or the Roth 401(k) prior to the rollover to the Roth IRA.
See Ordering Rules for Distributions in IRS Pub 590-B:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p590b#en_US_2016_publink1000231071">https://www.irs.gov/publication...>
For those portions from taxable conversions or earnings, if your home purchase qualifies is a first-home purchase, you can apply the first-home purchase exception to eliminate the penalty (but not the income tax unless you wait until 2019 to make the distribution).
Next out is your conversion basis, if any. Amounts converted to Roth from a traditional IRA or rolled over to a Roth IRA from a traditional 401(k) become conversion basis in your Roth IRA. Of your conversion basis, any amounts that were taxable at conversion or rollover come out first, tax-free but subject to penalty if you have not met the 5-year holding period for the conversion. These are followed by any amounts that were converted tax free (from after-tax basis in the traditional IRA or in the 401(k)), tax and penalty free. Finally, out comes any earnings earned either in the Roth IRA, or the Roth 401(k) prior to the rollover to the Roth IRA.
See Ordering Rules for Distributions in IRS Pub 590-B:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p590b#en_US_2016_publink1000231071">https://www.irs.gov/publication...>
For those portions from taxable conversions or earnings, if your home purchase qualifies is a first-home purchase, you can apply the first-home purchase exception to eliminate the penalty (but not the income tax unless you wait until 2019 to make the distribution).
‎June 6, 2019
7:06 AM