Liquidating roth ira
Figure the taxable and nontaxable portion of your distribution.
Since you're liquidating the entire IRA, it won't matter whether you have a traditional or a Roth IRA: The amount of nondeductible contributions to the account won't be taxable but any earnings or deductible contributions will be taxable.
Here’s an overview of how to liquidate Roth IRAs correctly to minimize taxes and penalties.
Some people are so in love with their Roth IRAs that they plan never to take the money out.
This penalty equals 10 percent of the taxable portion of the liquidation unless an exception, such as paying for higher education expenses or medical costs exceeding a specified percentage of your adjusted gross income.The rules for individual retirement accounts (IRAs) let you remove money whenever you want.However, before you liquidate and throw a party, consider both the taxes and the early-withdrawal penalties that apply to non-qualified distributions.For example, say you've made ,000 in nondeductible contributions to your IRA and it's now worth ,000, you'll only have to pay taxes on ,000.However, if you haven't made any nondeductible contributions, as is common with a traditional IRA, you'll pay taxes on the entire distribution.