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Retirement Beginner: Introduction to Individual Retirement Accounts (IRAs)

Introduction to Individual Retirement Accounts How You Can Fund Your IRA How to Contribute to an IRA How and When IRA Contributions Can Be Deducted from Taxable Income Limits on Deducting IRA Contributions if You Are Single or Married and Filing Separately Limits on Deducting IRA Contributions If You Are Married and Filing Jointly How IRAs Are Taxed Taxing of Deductible and Non-Deductible IRA Contributions Taxes on Excess IRA Contributions IRA Rollovers Premature Withdrawals and Insufficient Distributions from IRAs Summary of Individual Retirement Accounts
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Taxing of Deductible and Non-Deductible IRA Contributions

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Taxing of Deductible and Non-Deductible IRA Contributions

When you withdraw money from a traditional IRA, it is taxed, but only if it was deductible. The general rule is, whatever was deductible from taxable income at contribution time will be taxed at withdrawal time, and whatever was not deductible at contribution time will not be taxed at withdrawal. If your IRA consists of some contributions that were deductible and some that were not, your withdrawals must be separated accordingly so the proper portions can be taxed. The IRS provides formulas for this separation.