I opened Roth IRA account on 2006 and contributed few thousand and again contributed few thousand on 2007. Now I would like to withdraw from Roth IRA about $5000. Withdrawal doesnot fall in any of the specified categories mentioned in the early withdrawal condition. I want to withdraw for my personal use. But is there any rule there which help me not to pay tax or penalties? Also If I want to use this money to pay my first house loan in India, can I show it to IRS and can get benefit of early withdrawal condition. Please suggest.

QUOTE," Withdrawal doesnot fall in any of the specified catagories mentioned in the early withdrawal condition."---Then Roth IRA early withdrawal penalty for you is 10% on investment gains withdrawn from your Roth IRA before you reach your age 59 ½.
"But is there any rule there which help me not to pay tax or penalties?"--Actually there are several ways to avoid penalties or fees if an emergency or other qualifying situation arises. For instance, if your withdrawals are used to pay non-reimbursed medical expenses that are in excess of 7.5% of your adjusted gross income, AGI. Or suppose you use the withdrawals use to help pay for your first house purchase, or etc.
"Also If i want to use this money to pay my first house loan in India, can i show it to IRS and can get benefit of early withdrawal condition. "---Yes. As long as you are a US citizen, resident alien under either US Tax code or INS rule( green card holder, I mean) If you withdraw funds to pay for the cost of purchasing a first home for yourself, your spouse, your children, and/or your children's descendants, then you can take a distribution from your Roth IRA without having to pay income taxes or the 10% Roth IRA early withdrawal penalty.
But remember; this is limited to a lifetime total allowance of up to $10,000. This means that you can do this five times for five different family members by giving $2,000 per member or you can do this once fro $10,000 to only one member. But once you hit $10,000 lomited mark, then you can't ever take advantage of this tax-free, penalty-free distribution again.

wnhough - I am not aware that the first time home buyer exception applies to money withdrawn from an IRA and then gifted to children or other descendants for them to buy a first home - everything I've read says the first time home buyer exception for IRA withdrawas applies only to first-time home acquisition expenses for yourself or your spouse. Can you please cite a reference for this? Perhaps you are confusing the rules for first time home buyers with the exception for higher eduation expenses for yourself, spouse, or child. Also, the money would have to be used for the initial acquisition or construction of the home - such as the down payment, closing costs or financing charges, but not the subsequent mortgage payment. Loan repayment is NOT consdered to be a qualified acquisition expense.

Abar - please be aware that you will have to pay income tax on any portion of the withdrawal that is from earnings in the Roth IRA account. This is because your Roth IRA is less than 5 years old. If you could wait until the 5-year mark passes, you will not owe income tax regardless of how the money is used.

QUOTE," Can you please cite a reference for this?"--- I don't think that you can find the provision in Pub. 590. Please visit the web site:http://www.your-roth-ira.com/roth-ira-early-withdrawal-penalty.html--- "Purchase of a First Home - If you withdraw funds to pay for the cost of purchasing a first home for yourself, your spouse, your children, and/or your children's descendants, then you can take a distribution from your Roth IRA without having to pay income taxes or the 10% Roth IRA early withdrawal penalty. However, this is limited to a lifetime total allowance of up to $10,000."

http://www.irawithdrawal.net/need-money-from-your-ira-avoid-the-10-early-withdrawal-penalty-/---"if you use your ira money to pay for the purchase cost of your first home, you will be penalty free. . .. such as you, your spouse, children, grandchildren or ancestors. this exemption applies to a maximum withdrawal of $10,000."

ira withdrawal penalties (http://www.docstoc.com/docs/2836663/ira-withdrawal-penalties---refer) to the #1;"FIRST TIME HOME PURCHASE" OK??

QUOTE," This is because your Roth IRA is less than 5 years old."--Right! Under 5 year rule!

wnhough - thanks, I have learned something today! I did find this, in IRS pub 590, under the exceptions for the 10% early withdrawal penalty:


First home. Even if you are under age 59½, you do not have to pay the 10% additional tax on up to $10,000 of distributions you receive to buy, build, or rebuild a first home. To qualify for treatment as a first-time homebuyer distribution, the distribution must meet all the following requirements.
It must be used to pay qualified acquisition costs (defined later) before the close of the 120th day after the day you received it.

It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer (defined later) who is any of the following.

-Yourself.
-Your spouse.
-Your or your spouse's child.
-Your or your spouse's grandchild.
-Your or your spouse's parent or other ancestor.
It's strange that virtually every website I've seen that talks about exceptions mentions that the education expense exception applies to you, your spouse, or your child, but for the first-time home buyer they don't mention that it applies to other family members.

Thank you both for your suggestions.
-Abar