Are Distributions From My Roth IRA Taxable? You do not include in your gross income qualifieddistributions or distributions that are a return of your regularcontributions from your Roth IRA(s). You also do not includedistributions from your Roth IRA that you roll over tax free intoanother Roth IRA. You may have to include part of other distributionsin your income. See Ordering Rules for Withdrawals, later. What Are Qualified Distributions? A qualified distribution is, generally, any payment or distributionfrom your Roth IRA made after the 5-taxable-year period beginning withthe first taxable year for which a contribution was made to a Roth IRAset up for your benefit if the payment or distribution is: Made on or after the date you reach age 59 1/2, Made because you are disabled, Made to a beneficiary or to your estate after your death,or One that meets the requirements listed under Firsthome in chapter 1(up to a $10,000 lifetime limit). What Distributions Are Not Qualified Distributions? A distribution is not a qualified distribution if it is: Made within the 5-year period beginning with the first yearfor which either a regular or a conversion contribution was made to aRoth IRA set up for your benefit. Made after the 5-year period described in (1), but you donot meet any of the following requirements. You have not reached age 59 1/2. You are not disabled. The distribution is not made to a beneficiary or to yourestate after your death. You do not use the distribution to pay certain qualifiedfirst-time homebuyer amounts. (See First home underWhen Can I Withdraw or Use IRA Assets? in chapter 1.) The withdrawal of contributions and earnings on or beforethe due date of your return (including extensions) for the year inwhich you made the contributions. Additional tax on withdrawals of conversion contributionswithin 5-year period.If, within the 5-year period starting with the year in which youconverted any amount from a traditional IRA to a Roth IRA, youwithdraw from a Roth IRA an amount attributable to a portion of theconversion contribution that you had to include in income, yougenerally must pay the 10% additional tax on premature distributions.(See Ordering Rules later to determine the amount, if any,of the withdrawal that is attributable to the conversioncontribution.) Unless one of the exceptions listed below applies, you must pay theadditional tax on the portion of the withdrawal attributable to anypart of the conversion contribution that you had to include in incomebecause of the conversion. The 10% additional tax applies as though you must include theamount in gross income in the year of the withdrawal, even if you hadincluded it in income in an earlier year (such as in the year of theconversion). You also must pay the additional tax on any portion ofthe withdrawal attributable to earnings on contributions. SeeExample 2, later. Additional tax on early withdrawals.Unless one of the exceptions listed below applies, you must pay the10% additional tax on premature distributions on the taxable part ofany distributions that are not qualified distributions. Exceptions.You may not have to pay the 10% additional tax on prematuredistributions in the following situations. You have reached age 59 1/2. You are disabled. You are the beneficiary of a deceased IRA owner. You use the distribution to pay certain qualified first-timehomebuyer amounts. The distributions are part of a series of substantiallyequal payments. You have significant unreimbursed medical expenses. You are paying medical insurance premiums after losing yourjob. The distributions are not more than qualified highereducation expenses. The distribution is due to an IRS levy of the qualifiedplan. Additional tax on withdrawals of contributions by due date.You can withdraw contributions tax free by the due date of yourreturn for the year in which you made the contributions. If you havean extension of time to file your return, you can withdraw them taxfree by the extended due date. You can do this only if you alsowithdraw any interest or other income earned on the contributions. You must include in income any earnings on the contributions youwithdraw. Include the earnings in income for the year in which youmade the withdrawn contributions. See Excess Contributionsin chapter 1. Ordering Rules for Withdrawals If you make a withdrawal from your Roth IRA that is nota qualified distribution, part of the withdrawal may be taxable.For purposes of determining the correct tax treatment of withdrawals(other than the withdrawal of excess contributions and the earnings onthem, discussed earlier), there is a set order in which contributions(including conversion contributions) and earnings are considered to bewithdrawn from your Roth IRA. The order of withdrawals is as follows. Regular contributions. Conversion contributions, on a first-in-first-out basis(generally, total conversions from the earliest year first). SeeAggregation (grouping and adding) rules, later. Theseconversion contributions are taken into account as follows: Taxable portion (the amount required to beincluded in gross income because of conversion) first, and thenthe Nontaxable portion. Earnings on contributions. Rollover contributions from other Roth IRAs are disregarded forthis purpose. Aggregation (grouping and adding) rules.To determine the taxable amounts withdrawn (distributed),withdrawals and contributions are grouped and added together asfollows. All withdrawals from all your Roth IRAs during the year areadded together. All regular contributions made during and for the year(contributions made after the close of the year, but before the duedate of your return) are added together. This total is added to thetotal undistributed regular contributions made in prior years. All conversion contributions made during the year are addedtogether. For purposes of the ordering rules, in the case of anyconversion in which the conversion withdrawal is made in 1999 and theconversion contribution is made in 2000, the conversion contributionis treated as contributed prior to other conversion contributions madein 2000. Any recharacterized contributions that end up in a Roth IRA areadded to the appropriate contribution group for the year that theoriginal contribution would have been taken into account if it hadbeen made directly to the Roth IRA. Any recharacterized contribution that ends up in an IRA other thana Roth IRA is disregarded for the purpose of grouping (aggregating)both contributions and distributions. Any amount withdrawn to correctan excess contribution (including the earnings withdrawn) is alsodisregarded for this purpose. How Do I Figure the Taxable Part? To figure the taxable part of a withdrawal (distribution) that isnot a qualified distribution, complete the followingworksheet. Worksheet To Figure the Taxable Part of a Distribution From a Roth IRA Caution. If you convertedamounts from a traditional IRA in 1998 and you are including thetaxable part ratably over a 4-year period, do not use thisworksheet. Instead, see Withdrawals from Roth IRAs,earlier, and Examples, later, for information on how todetermine the amount to include in income. 1) Enter the total of all distributions madefrom your Roth IRA(s) during the year $          2) Enter the amount of qualified distributionsmade during the year            3) Subtract line 2 from line 1            4) Enter the amount of distributions made duringthe year to correct excess contributions made during the year            5) luxury hotels in StavangerSubtract line 4 from line 3            6) Enter the amount of distributions made duringthe year that were contributed to another Roth IRA in a qualifiedrollover contribution            7) Subtract line 6 from line 5            8) Enter the amount of all priordistributions from your Roth IRA(s) (whether or not they werequalified distributions)            9) Add lines 1 and 8            10) Enter the amount of the distributionsincluded on line 8 that were previously includible in your income            11) Subtract line 10 from line 9            12) Enter the total of all your contributions toall of your Roth IRAs            13) Enter the total of all distributions made(this year and in prior years) to correct excess contributions            14) Subtract line 13 from line 12. (Do not enterlessthan 0.)            15) Subtract line 14 from line 11. (Do not enterlessthan 0.)            16) Enter the smaller of the amount on line 7 orthe amount on line 15. This is the taxable part of yourdistribution $          Examples The following examples illustrate the rules affecting the taxtreatment of distributions from Roth IRAs. Example 1.On October 15, 1998, Justin converted all $80,000 in histraditional IRA to his Roth IRA. His Forms 8606 from prior years showthat $20,000 of the amount converted is his basis. Because of theconversion, Justin must include $60,000 ($80,000 minus $20,000) in hisgross income. He did not elect to report all the income in 1998, sothe income is spread ratably over 4 years. For 1999, Justin mustinclude $15,000 ($60,000 divided by 4) in his gross income for 1999.On February 23, 1999, Justin makes a regular contribution of $2,000 toa Roth IRA. On November 7, 1999, Justin withdraws $5,000 from his RothIRA. The first $2,000 of the withdrawal is a return of Justin'sregular contribution and is not includible in his income. The next$3,000 of the withdrawal is includible in income because of thespecial early inclusion rule for conversion contributions that arewithdrawn during the 4-year spread period. The $3,000 is added to the$15,000 of conversion income that is includible in his income for 1999under the 4-year rule. Justin must report $18,000 as taxable IRAdistributions on his return for 1999. Because the $3,000 isdistributed before the end of the 5-year period, it is subject to the10% additional tax on early withdrawals that applies to distributionsof conversion contributions. Justin must file Form 5329 with hisreturn to report the early withdrawal and figure the additional tax orclaim an exception, if one applies. Example 2.The facts are the same as in Example 1, except thatJustin makes a $2,000 regular contribution to his Roth IRA in eachyear 1999 through 2002 and does not make any withdrawals in 1999through 2002. On February 14, 2003, Justin withdraws $85,000 from hisIRA. The first $10,000 of the distribution is a return of his regularcontributions (the total of his regular contributions in each year1999 through 2003). This amount is returned tax free. The next $60,000is a return of the conversion contribution made in 1998 that wasincludible in income in 1998, 1999, 2000, and 2001. This amount is notincludible in income in 2003. The remaining $15,000 is a return of theconversion contribution made in 1998 that was not includible in incomebecause it was part of his basis. This amount is returned tax free.Although none of the distribution is includible in income, the $60,000of conversion contributions withdrawn is subject to the 10% earlywithdrawal tax, unless an exception to that tax applies. The tax isapplied as though the $60,000 is includible in income in the year ofthe distribution. This is because the conversion contribution that wasincludible in income is distributed within the 5-year period beginningwith the year of the conversion contribution (1998). In this case, theadditional tax is $6,000. Although Justin has no income to report fromthe distribution, he must file Form 5329 to report the additional tax. Example 3.Assume the same facts as in Example 2, except that thereis no distribution in 2003. Instead, Justin withdraws the entire$170,000 balance in his Roth IRA in 2004. The balance includes allcontributions made to the IRA and the earnings on those contributions($90,000 of contributions and $80,000 of earnings). Because Justin isnot age 59 1/2 or disabled and the distribution will notbe used to buy a first home, the distribution is not a qualifieddistribution. As in Example 2, the first $10,000 of thedistribution is treated as a return of his regular contributions. Thisamount is returned tax free. The next $60,000 is a return of theconversion contribution made in 1998 that was includible in income in1998, 1999, 2000, and 2001. This amount is not includible in income.The next $20,000 is a return of the conversion contribution made in1998 that was not includible in income in 2004. This amount isreturned tax free. The last $80,000 distributed is the earnings on thecontributions. This amount must be included in Justin's gross incomefor 2004 and is subject to the 10% additional tax on early withdrawalsunless an exception applies. Am I required to take distributions when I reach age 70 1/2?You are not required to take distributions from your Roth IRA atany age. The minimum distribution rules that apply to traditional IRAsdo not apply to Roth IRAs while the owner is alive. However, after thedeath of a Roth IRA owner, certain of the minimum distribution rulesthat apply to traditional IRAs also apply to Roth IRAs. Can I use my Roth IRA to satisfy minimum distributionrequirements for traditional IRAs?No. Nor can you use distributions from traditional IRAs forrequired distributions from Roth IRAs. See Distributions tobeneficiaries, later. hôtels BlackpoolDistributions After Owner's Death If a Roth IRA owner dies, the minimum distribution rules that applyto traditional IRAs apply to Roth IRAs as though the Roth IRA ownerdied before his or her required beginning date. See When Can IWithdraw or Use IRA Assets?, in chapter 1. Distributions to beneficiaries.Generally, the entire interest in the Roth IRA must be distributedby the end of the fifth calendar year after the year of the owner'sdeath unless the interest is payable to a designated beneficiary overthe life or life expectancy of the designated beneficiary. (SeeBeneficiaries under When Must I Withdraw IRA Assets?in chapter 1.)If paid as an annuity, it must be payable over a periodnot greater than the designated beneficiary's life expectancy anddistributions must begin before the end of the calendar year followingthe year of death. Distributions from another Roth IRA cannot besubstituted for these distributions unless the other Roth IRA wasinherited from the same decedent. If the sole beneficiary is the spouse, he or she can either delaydistributions until the decedent would have reached age 70 1/2, or treat the Roth IRA as his or her own. Aggregation with other Roth IRAs.A beneficiary can aggregate an inherited Roth IRA with another RothIRA maintained by the beneficiary only if the beneficiary eitherinherited the other Roth IRA from the same decedent or was the spouseof the decedent, the sole beneficiary of the Roth IRA, and elects totreat it as his or her own IRA. Table 3.1 Education IRAs At a Glance Distributions that are not qualified distributions.If a distribution to a beneficiary does not satisfy therequirements for a qualified distribution, it is generally includiblein the beneficiary's gross income in the same manner as it would havebeen included in the owner's income had it been distributed to the IRAowner when he or she was alive. If the owner of a Roth IRA who is including the conversion of a1998 withdrawal under the 4-year rule dies before all amounts areincluded in gross income, all remaining amounts are included in theIRA owner's gross income for the year of death. Consequently,beneficiaries generally receive distributions of conversioncontributions tax free, provided the distributions are made after theend of the 5-year period discussed under What Are QualifiedDistributions?, earlier. To determine the 5-year period, countthe time the Roth IRA was held by the owner and the beneficiary. Thereis a special rule if the spouse is the sole beneficiary of the IRA.See Death of IRA owner during 4-year period under CanI Move Amounts Into a Roth IRA?, earlier. If the owner of a Roth IRA dies prior to the end of the 5-yearperiod discussed earlier under What Distributions Are NotQualified Distributions, or the 5-year period starting with theyear of a conversion contribution, each type of contribution isdivided among multiple beneficiaries according to the pro-rata shareof each. See Ordering Rules for Withdrawals, earlier. Example.When Ms. Hubbard dies in 2000, her Roth IRA contains regularcontributions of $4,000, a conversion contribution of $10,000 that wasmade in 1998, and earnings of $2,000. No distributions had been madefrom her IRA. She had no basis and did not elect to pay the tax on theentire conversion contribution in 1998. When she established her IRA,she named each of her 4 children as equal beneficiaries. Each childwill receive one-fourth of each type of contribution and one-fourth ofthe earnings. An immediate distribution of $4,000 to each child willbe treated as $1,000 from regular contributions, $2,500 fromconversion contributions, and $500 from earnings. In this case,because the distributions are made before the end of the 5-yearperiod, each beneficiary includes $500 in income for 2000. The 10%addition to tax on premature distributions does not apply because thedistribution was made to the beneficiaries as a result of the death ofthe IRA owner. The amounts not previously included in Ms. Hubbard'sgross income under the 4-year rule are included in gross income on herfinal return. Estadia en Hoteles LetterkennyBasis of distributed amounts.The basis of property distributed from a Roth IRA is its fairmarket value (FMV) on the date of distribution, whether or not thedistribution is a qualified distribution.