Qualified Distributions

• To take a qualified distribution from a Roth IRA, an account holder must have had the account open for five years, which starts from January 1 of the tax year in which the account was opened. He must also either suffer from a permanent disability, be 59-1/2 years old or plan to use no more than $10,000 for the costs associated with buying a first home.
  
  

Early Distributions

• Early distributions from a Roth IRA first come out of the account holder's contributions. These withdrawals are tax-free and penalty-free because contributions are made with after-tax dollars. Account holders must report early withdrawals of earnings as taxable income, and must pay an additional 10 percent tax penalty.
  
  

Considerations

• Account holders can avoid the 10 percent early withdrawal penalty on an early withdrawal of earnings if they use the money for medical expenses that exceed 7.5 percent of their adjusted gross income or higher education costs. If an exception applies, they must file form 5329 with their income taxes.