Qualified distributions from your Roth IRA are not included in your taxable gross income. To be qualified, a distribution has to meet the following requirements:
It has been at least 5 years since the beginning of the first year you set up and contributed to the Roth IRA.
You must have made the distribution:
On or after the date you reached age 59 ½,
Because you are disabled,
To a beneficiary or to your estate after your death, or
To buy or rebuild a first home.
Additional Tax on Early Distributions
A distribution that does not qualify according to these conditions may be subject to a 10% additional tax as an early distribution. If you convert amounts from another IRA, such as a traditional IRA, to your Roth IRA, a separate 5-year period applies to each conversion. You generally have to pay the 10% additional tax on any part of a conversion that you had to include in income. The 10% additional tax applies in the year of the distribution. There are “ordering rules” to determine how much of a distribution has to be included in taxable income (see below).
Normally, you would have to pay the 10% additional tax on the part of any distributions that must be included in your income because they are not “qualified distributions”, as defined above. But there are exceptions. You may not have to pay the additional tax if you have not yet met the 5-year test, but you are 59 ½ years of age or older, you are disabled, the distribution is made as a result of your death, or the distribution is used to buy or rebuild a new home (the tests for qualified distributions, other than the 5-year period test). Other exceptions include:
The distributions are part of a series of substantially equal payments (such as an annuity).
You have significant un-reimbursed medical expenses, or you are paying medical insurance premiums after losing your job.
The distribution is being used to pay qualified higher education expenses.