Is the money taken out of an IRA counted as income at the end of the year?

Question

If you are 59&1/2 is the money considered income. I know that there are no penalties or intrest on the withdrawl, but what about taxes at the end of the year. Is there a limit that can be taken out or can you take out as much as you need.

Answer 1

Allow me to be the first to answer, "not always". What everyone else is forgetting is that sometime, people fund their IRAs with post-tax money a.k.a. non-deductible contributions.

Traditional IRA withdrawals - the amount of pre-tax contributions plus gains are taxed just like any ordinary income (think of them as interest because, unlike compensatory income 'W-2', IRA withdrawals are not taxed for social security or medicare). The post-tax contributions come out tax free. As stated by earlier responders, you may not actually owe any tax if the taxable amount withdrawn plus all your other taxable income is below your standard/itemized deduction plus exemptions. Keep in mind, social security earnings are not taxed unless you have other income like IRA withdrawals...so your IRA withdrawals are not only taxable, but can also make your social security taxable.

All amounts withdrawn from a Roth IRA are tax free if withdrawn in the year you reach 59 1/2 or later.

As far as limits, there no maximum nor minimum limit for a Roth. In fact, you can leave the money in there until you die and your heirs can inherit it without having to claim it as income. For the Traditional IRA, there is no maximum, but there is a minimum starting in the year you reach 70 1/2. When you heirs inherit this pot, they will have to treat it is as income.

Hope this helps :)

Answer 2

For a traditional IRA, yes, it's considered income at the end of the year. You didn't pay taxes on the money going in, or on the appreciation, so you pay them when you take it out. You can take out as much as you want to each year, the only upper limit is what you have in the account. At some age (somewhere over 70) there's a minimum percentage you have to take out.

For a Roth IRA, the money taken out is not counted as income. You paid the taxes going in, and the appreciation is tax-free.

Answer 3

For a traditional IRA, yes the money is considered income. It may or may not be taxable depending on your total income. You can probably take out as much as you need. Once you reach 70 1/2 there are minimum amounts that must be withdrawn.

Answer 4

Try asking your boss to withhold more. Thing is taxation is bracketed. I have around the same income and used to be considered self employed. That was a *****, ended up owing like 7k one year. The winnings probably did you in. I think its like 40% on winnings but im not sure about those numbers. Only 2900 in writeoffs. I usually include tuition when it applies and anythign that relates to work. I would assume that there is a cap on 401k writeoffs. Taxes are unavoidable and so are teh expenses just plan for them and count on the gov taking about 35-40% every year. Look into your witholding amount and put aside any moer you think will be needed. Buy like a short term CD or soemthing relatively secure and invest the money untill april. That or have like 10 kids.

Answer 5

Yes, it is income. I think for a Roth IRA the interest (or other gain) is taxable but not your contribution, if you start to take it out prior to being 59

Answer 6

First, there is no limit to what you can withdrawal. But yes, if this is a traditional IRA (Not a Roth), the withdrawal is subject to taxes.

If you need help on this or other tax matters, feel free to contact me via: http://www.slarson.com/contact or [e-mail]

Regards,

Steve

Answer 7

Survey says.......no!