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Early Distribution from Roth IRA

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Early Distribution from Roth IRA

At DimovTax, we understand that navigating the complexities of tax rules can be challenging, especially when it comes to retirement accounts like Roth IRAs. If you’re considering an early distribution from your Roth IRA, it’s crucial to be aware of the potential tax implications.

  • Tax-Free Principal Withdrawal:

The good news is that contributions to a Roth IRA are made with after-tax dollars. This means that your contributions are always tax-free since you’ve already paid taxes on those funds.

  • Tax Treatment of Earnings:

The earnings on your Roth IRA contributions can also be tax-free if the following conditions are met.

    1. Account age: Your Roth IRA account must have been open for at least five years.
    2. Owner’s Age: You must be at least 59½ years old, deceased, or disabled.
  • Early Distribution Penalty:   

Taking an early distribution of earnings from your Roth IRA before reaching the age of 59½ without meeting any exceptions may subject you to a 10% early withdrawal penalty on the earnings. This penalty is in addition to any income tax due on the earnings.

What’s next?

There are certain exceptions to bypass the early withdrawal penalties. At DimovTax, we stay up-to-date with the latest tax laws and regulations. We will guide you through:

  • When is the best time to take early distribution?
  • What are the ordering rules?
  • What are the tax implications in detail?
  • What are some of the exceptions that you may qualify for a tax-free withdrawal?
  • What to expect when filing your tax return?
  • How to correctly calculate your basis vs. earnings?

Contact us today to find out more about this topic. We are committed to providing personalized tax advice and helping you navigate the complexities of the tax code, ensuring your financial well-being. 

Need help with Early Distribution from Roth IRA?

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