Qualified distributions from a Roth retirement savings account, which are completely tax-free, can only begin in the first year after the taxpayer has owned such a Roth account for five calendar years.
You can generally also roll over ("convert") non-Roth distributions from an employer plan into a Roth IRA (you'll generally pay tax upon the "conversion" but
qualified distributions from the Roth IRA will be tax free).
As before, there is no annual limit on
qualified distributions from 529 plans for higher education.
Contributions to a Roth IRA are not deductible, but
qualified distributions are tax-free.
Therefore, although married taxpayers can make
qualified distributions totaling $200,000, each spouse can only make distributions of up to $100,000 from his or her own IRA.
Roth IRA accounts are frequently touted for their tax benefits, primarily
qualified distributions that are tax-free (Sec.
(1) While a taxpayer cannot take an upfront deduction for contributions,
qualified distributions are not taxable.
The accounts allow plan participants to contribute after-tax money to their savings, owing no further taxes on
qualified distributions that result.
(8) In addition,
qualified distributions from Roth IRAs are not includable in gross income.
You'll have to pay taxes on the amount you roll over, but any
qualified distributions from the Roth IRA in the future will be tax free.
Contributions are made with after-tax dollars, grow tax free and when
qualified distributions come out of the account, they are not subject to tax.
What makes the new Roth IRA option so appealing to me is that, if properly done,
qualified distributions are not taxed.
