INCOME TAXATION AND IRAs
01.Core Concepts
• Generally, ordinary income • Exceptions: • Return of basis Use exclusion ratio • Roth IRAs (excluded from income) • Penalties • Too early (early distribution penalty before age 59½) – 10% • Too much (excess contribution penalty) – 6% • Too late (late required distribution penalty) – 25% • SECURE 2.0 Act, tax years after 12/29/2022, penalty decreased from 50% to 25% (or 10% if failure corrected timely).