Hi jslimmers,
Thanks for participating in today's event!
It sounds like you received an inherited IRA. There are various factors that determine the tax impact of this.
- One factor is whether this is a Roth IRA or a traditional IRA. If it is a Roth IRA, and the account is at least five years old, then the entire distribution is tax-free. If the account is less than five years old, any withdrawals of contributions are tax-free, but withdrawals of earnings are subject to income taxes. If this is a traditional IRA, then the entire withdrawal is subject to income tax for the year you take the distribution.
- Death of the account holder is another factor (whether they died before 2020 vs. in 2020 or thereafter).
- Your relationship to them is yet another factor (spousal vs. non-spouse).
This IRS site provides more guidance on this issue: Retirement Topics - Beneficiary
I hope this information is helpful.
Kindly,
Katie