How are IRA withdrawals taxed?
Withdrawals from Traditional and SEP IRAs are generally taxed as ordinary income. However, if you have funded your IRA with non-deductible contributions (and have reported properly with the IRS), this portion of your IRA is not taxable upon withdrawal. Withdrawals before age 59 ½ are generally subject to a 10% early withdrawal penalty (unless certain conditions are met). Withdrawals from Roth IRAs are tax free if you are age 59 ½ or older and the account has been open for five years. Prior to meeting these requirements, any earnings withdrawn are taxable as ordinary income and subject to the early withdrawal penalty before age 59 ½.
