Yes, IRA distributions are taxable. You do not pay tax while the money is in the account, but you pay tax when you withdraw the money.
Nothing is tax free. On a Roth IRA you pay the tax on the money the year you put it into the IRA. You are supposed to be able to withdraw it from the IRA without paying tax on it. In a regular IRA you put the money into an IRA and do not pay tax on it when you put it in. You pay the tax on it when you withdraw it. The idea behind the regular IRA is that you will pay taxes in old age when your income is down. The idea behind the Roth is that the government can get money from you now. You have to decide which you think is better in your particular situation.
I guess it depends;for instance, the traditional IRA is a retirement savings plan where contributions may be tax deductible and the values can grow tax deferred until withdrawal at retirement.However, for 2010, the IRA contribution limit for any wage earner is $5,000 or the individual's taxable wages, whichever is less. A wage earner over the age of 50 can contribute an additional $1,000 into an IRA. In the case of R-IRA, Roth IRA contributions are not tax deductible by definition. The tax benefit from a Roth IRA is taken at retirement when distributions are tax-free.
Yes, although you will get options that give you some (limited) flexibility with regard to WHEN you take the distributions and pay the taxes.
Contributions to a SIMPLE IRA, or Savings Incentive Match Plans for Employees, are not taxable. Contributions made to an IRA are, in fact, tax deductible. There are limits on how much one can contribute to an IRA each year, and on how much one can deduct. Distributions from an IRA (whether Traditional or Simple), however, are indeed taxable.
Converting a traditional IRA to a Roth gives you that future tax-free benefit, but at an immediate tax cost. You'll have to pay taxes on contributions that you previously deducted, as well as on the account's earnings. For more details speak with your plan administrator.
Yes when you take non qualified distributions. If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions under the age of 59 1/2. You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). IRS Publication 590 has the details available. about this.
An after-tax IRA (a Roth IRA) will not reduce your taxes in the current year. You will not get any kind of deduction on your current taxes for contributions to a Roth IRA. However, when you retire the distributions from the Roth IRA will be tax free. A Traditional IRA will give you a deduction on your current year taxes, but the distributions will be taxed as income when you retire.
Distributions from a traditional ("regular") IRA are taxable unless part of the distribution comes from a non-deductible contribution or a rollover of after-tax money. So you will pay tax when you take money out of the IRA, unless you can establish that the deceased person had after-tax money in the IRA. You may want to approach the executor of the estate to see if the tax records of the deceased reflect any after-tax (non-deductible) contributions. If you are concerned with what happens to your own IRA after you die, consider making your tax records available so that your beneficiary can easily find them. Distributions from an inherited Roth IRA are not taxable if the Roth IRA has been in existence for at least 5 years at the time the distribution is taken. If the IRA has not been in existence for 5 years, only distributions of the earnings are taxable. Distributions of contributions are not taxable. And the regular ordering rules apply: Any distributions are considered to have come from contributions before earnings, so even if you inherit a relatively new Roth IRA, you can try to stretch out the distributions so that you take out the earnings after 5 years. Again, you would need tax records of the deceased to determine whether the IRA is at least 5 years old and if it is less than five years old to determine how much is contributions and how much is earnings.
No. IRA distributions may be subject to income tax only.
We will make a guess that this is a question about the qualified distributions and nonqualified distributions from a ROTH IRA account. Age 59 1/2 also will be a factor that will apply to the 10% early withdrawal penalty.The below information is available by going to the IRS gov website and using the search box for Publication 590 (2009), Individual Retirement Arrangements and go to chapter 2Are Distributions Taxable?You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth Ira's. You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. You may have to include part of other distributions in your income. See Ordering Rules for Distributions , later.Is Roth Distributions a Qualified Distribution?Additional Tax on Early DistributionsIf you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs.Distributions of conversion and certain rollover contributions within 5-year period. If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income. A separate 5-year period applies to each conversion and rollover. See Ordering Rules for Distributions , later, to determine the amount, if any, of the distribution that is attributable to the part of the conversion or rollover contribution that you had to include in income.Ordering Rules for DistributionsIf you receive a distribution from your Roth IRA that is not a qualified distribution, part of it may be taxable. There is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA.
The taxes for 529 distributions are outlined in the IRS tax codes. Any distributions made for a qualifying state college does not count towards the taxpayers income.
The main advantage of a Traditional IRA, compared to a Roth IRA, is that contributions are often tax-deductible. For instance, if a taxpayer contributes $4,000 to a traditional IRA and is in the twenty-five percent marginal tax bracket, then a $1,000 benefit ($1,000 reduced tax liability) will be realized for the year. Because qualified distributions are taxed as ordinary income (the taxpayer's highest rate), the long-term benefits of the traditional IRA are only comparable to those of a Roth IRA (whose qualified distributions are tax free) if the current year tax benefit ($1,000 above) is reinvested, or if the pre-tax amount going into both is the same.
Single premium immediate annuity payouts (monthly or annual) from an IRA account automatically satisfy the IRS required minimum distribution rule. The annuity payouts are calculated based on life expectancy tables, just as RMD distributions are. The total of the IRA/SPIA account can therefore be excluded from the RMD calculation. Of course, ordinary income tax rates must be applied to the IRA SPIA distributions, as they are to any IRA distribution(s). CC, ChFc
Distributions will be subject to income tax to the same extent they would be if the deceased had taken them. Roth IRA distributions will be tax-free even if the deceased did not live to age 59 1/2 (except for earnings withdrawn before the fifth year of the Roth IRA).
A stretch IRA is a strategy that allows beneficiaries to "stretch" the distributions from an inherited IRA over their life expectancy to minimize taxes, while an inherited IRA refers to an IRA that is inherited by a beneficiary upon the death of the original account holder. Inherited IRAs must be taken as distributions and cannot be contributed to, unlike traditional IRAs.
Nothing is tax free. On a Roth IRA you pay the tax on the money the year you put it into the IRA. You are supposed to be able to withdraw it from the IRA without paying tax on it. In a regular IRA you put the money into an IRA and do not pay tax on it when you put it in. You pay the tax on it when you withdraw it. The idea behind the regular IRA is that you will pay taxes in old age when your income is down. The idea behind the Roth is that the government can get money from you now. You have to decide which you think is better in your particular situation.
Generally, early distributions from an IRA are subject to a 10-percent tax in addition to the regular income tax on your total income. Early distributions are amounts that are distributed before you reach age 59 1/2. There are several exceptions to the age 59 1/2 rule. The beneficiary of a deceased IRA owner is exempt from the additional 10 percent tax. If you choose to treat the IRA as your own, other requirements apply. For more information, go online at www.irs.gov/formspubs. Select Publication Number. Type 590 to read/print Publication 590 (Individual Retirement Arrangements). Another helpful source is Tax Topic 557 (Tax on Early Distributions from Traditional and Roth IRAs), available online at www.irs.gov/taxtopics.