How are distributions from a Traditional IRA taxed?

Distributions from a traditional IRA are taxed as ordinary income, but if you made nondeductible contributions, not all of the distributions will be taxable.

In order to enforce the policy that IRAs be used for retirement savings, not for preretirement uses or for building an estate to pass on to heirs, the rules prohibit or strongly discourage both distributions before retirement age and distribution schemes that would leave most of an IRA undistributed at the end of the taxpayer's life expectancy.

Internal Revenue Code Section 72(t) imposes a tax equal to 10 percent of certain early distributions from IRAs (exclusive of portions considered a return of nondeductible contributions). The tax, which is payable in addition to the regular income tax on the distribution, applies to all IRA distributions but the following:

Please contact one of our IRA Experts at 800-472-0646 for more information.


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