How are SIMPLE IRA distributions taxed?
Distributions from a SIMPLE IRA are generally taxed like distributions from a Traditional IRA. Funds withdrawn prior to age 59 1/2 are generally subject to early-withdrawal penalties. Distributions taken (before age 59 1/2) during the first two years of participation in a SIMPLE IRA are subject to a 25 percent penalty; after two years’ participation, the penalty decreases to 10 percent.
