How can you borrow from a Roth IRA?

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Loans are not allowed from IRAs or from IRA-based plans such as SEPs, SARSEPs and SIMPLE IRA plans. Loans are allowed from qualified plans that satisfy the requirements of 401(a), from annuity plans that satisfy the requirements of 403(a)s or 403(b)s, and from governmental plans.

That said, with a Roth IRA, the principal amount may be withdrawn without any tax consequence because you have already paid taxes on those funds. You may borrow the principle from a Roth IRA although the appreciation is different. The amount that your IRA has appreciated is not available for withdrawal without paying certain types of taxes and fees.

Keep in mind, there is an instance where you may not directly withdraw the original investment from a Roth IRA. In this scenario, if you have converted the funds over from your traditional IRA into a Roth IRA, the amount converted over may not be available for a penalty free withdraw for five years.

As always, please refer to your CPA before making any personal tax decisions.

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