How Do You Determine Taxes On An IRA Distribution?
A person may take distributions from a traditional Individual Retirement Account (IRA) for many reasons. However, you must pay taxes based on when and why you took a distribution. It’s important to be able to determine the amount of taxes you’re required to pay, as distributions are typically taxed the same year the distribution is made. Determine how much money you need from your IRA. Knowing the amount you need distributed allows you to calculate the taxes on your IRA distribution. Find out if you have made any Nondeductible Contributions to your IRA. Nondeductible Contributions are made to your IRA when you were unable to claim a tax deduction that year for your IRA contribution. If you have Nondeductible Contributions, your distribution is only partially taxable. In contrast, if you were able to claim a tax deduction in the year of the contribution, then your distribution is fully taxable. Go to the IRS website and print out IRS Form 8606, Nondeductible IRAs. Fill out this form to
