1 For a distribution from a Roth IRA to be federal (and generally state) income tax-free, it must be qualified. A qualified distribution from a Roth IRA is one that is taken at least five tax years after the first day of the year of your first Roth IRA contribution or Roth conversion and you (i) are age 59½ or older; (ii) are disabled; (iii) qualify for a special purpose distribution such as the purchase of a first home (lifetime limit of $10,000); or (iv) are deceased. If you take a nonqualified distribution, any Roth IRA investment returns are subject to regular income taxes, plus a possible 10% additional federal tax if withdrawn before age 59½, unless an exception applies. A special provision applies for converted assets. If a nonqualified distribution is made within five years of the conversion, the earnings withdrawn will be subject to income tax, and the entire withdrawal may be subject to an additional 10% federal tax unless an exception applies.
Opinions are as of the date of this article 05/21/2021 and are subject to change.
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