Withdrawals from Traditional IRAs

Withdrawals from traditional IRAs are generally taxable in the year they are received. However, if the IRA ever received nondeductible contributions, a portion of the withdrawal would be nontaxable. The nontaxable share of a withdrawal is equal to the following:

Total nondeductible contributions made to the account
plus the basis rolled over from qualified plans
minus nontaxable withdrawals made in prior years
divided by the value of the account.

Withdrawals and distributions are subject to a penalty tax of 10 percent unless one of the following conditions applies:

• The participant is at least 59½ years old;
  
  
• The participant has become disabled;
  
  
• The participant has died, and the distribution is made to the designated heirs;⁽¹⁾
  
  
• The distribution is in the form of a lifetime annuity;
  
  
• The withdrawal does not exceed medical expenses for the tax year in excess of 7.5 percent of AGI;
  
  
• The participant is unemployed and the withdrawal does not exceed health insurance premiums paid that year;
  
  
• The withdrawal (up to $10,000) is applied toward the first-time purchase of a house;
  
  
• The withdrawal does not exceed the postsecondary education expenses of the participant or the participant's spouse, child, or grandchild for the year.

Withdrawals become mandatory after age 70½. The required minimum distribution amounts depend on projected longevity under the same rules that apply to employer plans. IRAs are not, however, subject to rules that require a spouse's consent to distribute funds in a manner other than through a joint and survivor annuity.