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How do I know if my IRA Distribution is qualified or non qualified?

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How do I know if my IRA Distribution is qualified or non qualified?

It's hard to tell what the issue is without knowing more about your return. However, here's some info about qualified vs non-qualified IRA distributions.

Please feel free to post any additional details or questions in the comment section and we can help you determine if yours is qualified.

An IRA is a way to save for retirement while deferring taxes on the earnings, or to plan for tax-free withdrawals in retirement. Because of these tax advantages, the IRS imposes penalties for "non-qualified" withdrawals from the individual retirement account. The usual penalty for a non-qualified withdrawal is 10 percent of the amount you withdraw. What constitutes a non-qualified withdrawal depends on whether the individual retirement account is a traditional IRA, a Roth IRA, or a self-employed IRA.

If your IRA is funded by before-tax money, meaning that you claimed a deduction from your income for your contributions, any amount you withdraw before you reach age 59 1/2 is a non-qualified withdrawal, and it's subject to penalties. If you made non-deductible traditional IRA contributions, any amount that you withdraw that is not attributable to the non-deductible contribution -- such as the earnings -- is a non-qualified withdrawal.

A qualified distribution from a Roth IRA is tax-free and penalty-free, provided that the five-year aging requirement has been satisfied and one of the following conditions is met:

  • Over age 59½
  • Death or disability
  • Qualified first-time home purchase

non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies. For Roth IRAs, you can always remove post-tax penalty contributions (also known as "basis") from your Roth IRA without penalty.

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