If you don't have access to an employer-sponsored 401(k), or if you simply want to save some extra money for retirement, you may invest in an individual retirement arrangement. Though an IRA is intended to hold money until you reach retirement age, you may sometimes need to borrow money from the account to pay for unexpected expenses.
Borrowing from an IRA
According to Internal Revenue Service guidelines, you can borrow money from a Roth or traditional IRA for up to 60 days without owing any penalties or taxes. If you don't re-deposit the money into the account within 60 days, however, the IRS will consider the loan a withdrawal, and you may owe income tax and a 10-percent penalty if you are under age 59 1/2. There is no limit on the amount you can borrow, and you can withdraw the money for any purpose, as long as you return it to the account before the deadline.
Rules on Frequency
Though the amount you can borrow from your IRA is unlimited, you can only borrow from the account once during any 12-month period. If you have multiple IRA accounts, you can borrow once from each one. If you borrow more than once, you must claim the amount you withdraw as income, and you may owe an early withdrawal penalty.
If you have multiple IRAs, you can re-deposit borrowed funds into any of the accounts. However, after you have re-deposited funds tax-free into an IRA account, you can't re-deposit into the same account again for at least 12 months. For example, if you borrow money from IRA one and re-deposit it into IRA two, any money borrowed from IRA two within 12 months must be re-deposited into IRA one or another account.
If you borrow from your IRA during the year, you must report the amount you borrowed on line 15a of Form 1040. If you have already re-deposited the funds, you can report your taxable amount as zero on line 15b. If you withdraw money from a single account more than once during a 12-month period, or if you neglect to re-deposit it within 60 days, you won't be able to re-deposit the money into the account at all.