IRA Distributions

In general, you do not include in your gross income qualified distributions from your Roth IRA. You may have to include part of other distributions from Roth IRA(s) in your income.

A qualified distribution is generally, any payment or distribution made after the 5-taxable-year period beginning with the first year for which a contribution was made to a Roth IRA set up for you, and that is made on or after you reach age 59 1/2, made because you are disabled, made to a beneficiary or to your estate after your death, or that is made to buy, build, or rebuild a first home.

A distribution used to buy, build or rebuild a first home must be used to pay qualified costs for the main home of a first time home buyer who is either yourself, your spouse, or you or your spouse's child, grandchild, parent, or other ancestor. When added to all your prior qualified first-time homebuyer distributions, if any, the total distributions cannot be more than a certain limit.

Part of any distribution that is not a qualified distribution may be taxable as ordinary income and subject to the additional tax on early distributions. Distributions of conversion contributions within a 5-year period following a conversion may be subject to early distribution tax, even if the contributions have been included as income in an earlier year.

If you converted your traditional IRA to a Roth IRA, but were not eligible to do so, your conversion will be treated as a taxable distribution from your traditional IRA and a regular contribution to your Roth IRA, and may be subject to additional tax on early withdrawals and an excise tax on excess contributions, unless the converted amount is re-characterized.

You may re-characterize your Roth IRA conversion by directly transferring the amount converted (including all net earnings from the date of conversion) back to a traditional IRA. You may do this prior to the due date, including extensions, for filing your tax return.

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