taxable or non taxable on ROTH IRA contribution?
Hello: thank you in advance on responding my question. If one contributed $2000 into ROTH IRA in 2007, could one withdraw the $2000 out any time without paying any (10%) penalty even though one is younger than 59 and half? Thanks!
Permalink Submitted by Clyde Wolf on Wed, 2009-03-04 17:14
Ahs,
Our money in a ROTH IRA is distributed in an ordered sequence.
First to come out is our Annual Contributions.
Second to come out is our Converted amounts.
Last to come out is Gains.
You can take your annual contributions from your ROTH IRA at any time for any reason without paying a penalty. You have already paid the income tax.
Converted amounts can be removed without paying income tax, as the tax was paid at the time of conversion. When the IRA owner is less than 59.5 years old and takes out some conversion money less than 5 years in the ROTH IRA, this distribution will be subject to the 10% penalty.
Distributions of gains when the ROTH IRA owner is less than 59.5 years old will need to pay income tax and a 10% penalty.
Permalink Submitted by Annie Hung-Scanga on Wed, 2009-03-04 19:17
Thanks. Is this based on the following (part of publication 590)? Yet it didn’t indicate clearly on age 59.5. I just want to be sure.
Are 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.
————–
versus:
Other early distributions. Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions.
Exceptions. You may not have to pay the 10% additional tax in the following situations.
*
You have reached age 59½.
Permalink Submitted by Alan Spross on Wed, 2009-03-04 19:25
Short answer to your first question is that you can take out amounts up to the total of your regular contributions tax and penalty free at anytime or any age.
Other issues relate to whether your earnings are subject to tax, and the distribution must be “qualified” for the earnings to escape tax. Regular and conversion contributions come out before earnings, so unless you have previously withdrawn these contributions, the distribution would be tax free.
I assume you do not have any Roth conversions, just regular contributions.
Permalink Submitted by Annie Hung-Scanga on Thu, 2009-03-05 00:36
Thank you both. I really appreciate it!