Can I borrow from an IRA without penalty?

By Denise Appleby AAA
A:

Technically speaking - yes. The 60-day rollover rule applies to all types of IRAs. This 60-day rollover rule allows you to withdraw assets from your IRA and roll over the amount within 60 days. If the amount is rolled over within 60-days, the distribution (withdrawn amount) is not taxable or subject to the early distribution penalty.

Note: This is technically not a ‘loan’, but a provision that allows temporary use of IRA savings outside of your IRA. This is – by definition, a ‘distribution’ and a ‘ rollover’ of the distributed amount.

Some reminders:

  • Generally, you can perform an IRA-to-IRA rollover only once during a 12-month period. According to a recent tax court ruling, all of your traditional IRAs are treated as one IRA for this purpose as of January 1, 2015. Prior to this date, the IRS indicated that this rule applies separately to each of your IRAs involved in such a distribution/rollover.
  • The same assets you withdraw must be the same assets that you roll over to your IRA. For instance, if you withdraw cash, you must roll over cash.
  • Only eligible amounts can be rolled over

This question was answered by Denise Appleby
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