How Are Funds Taxed at Distribution?
Traditional IRA–All distributions are fully taxable unless you made nondeductible contributions. That portion of the distribution is not taxable when withdrawn. Roth IRA–Qualified distributions of earnings from a Roth IRA are not subject to federal income taxes, however state taxes may apply. Nonqualified distributions of earnings are subject to income tax. Since regular and spousal Roth IRA contributions are nondeductible, and converted assets are fully taxable in the year of conversion, distributions of these amounts are not taxable.
