Message Font: Serif | Sans-Serif
No. of Recommendations: 0
teedup1 wrote:

- Any amount withdrawn from a Traditional IRA, including the principal, is fully taxable as ordinary income in the year the distribution is made/taken.

I reply:

This is incorrect. Any contributions which were made with after tax dollars (non-deductible in the year of contribution) are not taxed when they are withdrawn from the IRA. That's why non-deductible contributions are reported on Form 8606. The procedure is to take the total amount of your non-deductible contributions divided by the total value of your IRA on 12/31 of the year before the distribution and multiply by the value of the distribution. The "answer" you get is the amount of the distribution that is tax-free.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.