Taxes on Regular IRA Withdrawals

[BuzzardsBay]

When a person makes a withdrawal from a regular IRA and they are over 70 1/2 years old do they pay income tax on the lump sum amount withdrawn regardless of whether it is money they put in, capital gains, or dividends?  You don't have to keep track of what it is you're taking out do you?  I can't imagine that would even be possible for anyone who had the account for 30 years or something and had bought and sold different things and switched brokerage firms or mutual fund companies along the way.

[matchewed]

Money withdrawn is treated as regular income regardless of age except the before 59.5 where there is an additional tax penalty and the other exceptions like hardship withdrawals and the like. The growth of the money before withdrawal is ignored.

[BuzzardsBay]

Ok  Thanks.  (I was mixing up the age at which you can take out money and the age at which they pretty much force you to take out money.)  I thought trying to figure gains and all that would be nuts.

[Cheddar Stacker]

Yep, it's all the same, no distinctions or tracking of gains.

Except......non-deductible IRA contributions. Then it can get hairy. Since you never deducted it when you put it in it sort of acts like a Roth. The principal you put in is not taxable upon withdrawal. I'm not certain what happens with the gains, but I'm fairly sure they're taxed. Hopefully the brokerage house holding the funds is tracking that crap, but I'm not sure who he burden is on.

Roth, not taxed at all.

Traditional withdrawals (or conversions to Roth) go on line 15 on page 1 of the 1040, they increase your AGI, they are not subject to FICA (since you paid that upon earning the income), any normal deductions/exemptions can reduce them before arriving at taxable income, and any credits you have can be used to offset the tax.