Tax consequences of liquidating a roth ira

Distributions of Roth IRA assets from regular participant contributions and from nontaxable conversions of a Traditional IRA can be taken at any time, tax- and penalty-free.

Because these assets were taxed when converted, there will not be any income tax owed on the distribution.

Roth IRA's have many benefits compared to traditional IRA's.

For example, distributions from traditional IRAs are generally treated as ordinary income and may be subject to income tax as well as an additional early-distribution penalty if the withdrawal occurs while the IRA owner is under the age of 59½.

We will use examples of various 2018 distribution amounts from John's Roth IRA to show their tax treatment.

If John takes a distribution of ,000, the first ,000 comes from his regular Roth IRA contributions and is, therefore, tax- and penalty-free.

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