Roth IRAs

Tax on Distribution (continued…)

* For detailed information on a particular reason see IRS tax Publication 590, Individual Retirement Arrangements. “Qualified distributions” and Roth IRA distributions that are a return of regular Roth IRA Contributions are not included in gross income. 

A qualified Roth IRA distribution is one that meets these two requirements: 

The Roth IRA distribution is:

Made because of disability, or

Made after death, or

Meets the requirement for a first time home purchase

Example: 

Mrs. Smith has contributed to a Roth IRA since age 45. Mrs. Smith, owner of Roth IRA, dies at age 52. The value of the Roth IRA is $30,000 consisting of $10,000 of regular Roth IRA Contributions and $20,000 of growth. The entire $30,000 is exempt from income tax. $10,000 is the tax free return of regular Roth IRA Contributions. The $20,000 earnings growth is a tax free qualified Roth IRA distribution since the Roth IRA distribution was made after the 5 year period beginning with the year of the first contribution and was made by reason of death.

Related posts

• Sorry, no related posts at this time.