1. What is IRA Distribution Taxable Amount?

The taxable amount of an IRA distribution is the portion of the withdrawal that is subject to income tax. It's calculated by subtracting your basis (after-tax contributions) from the total distribution amount.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Distribution \) — Total amount withdrawn from the IRA (USD)
• \( Basis \) — Total after-tax contributions made to the IRA (USD)

Explanation: Only the portion of your IRA distribution that represents pre-tax money or earnings is taxable. Your after-tax contributions (basis) are returned tax-free.

3. Importance of Taxable Amount Calculation

Details: Accurately calculating the taxable portion of IRA distributions is essential for proper tax reporting and avoiding underpayment or overpayment of taxes.

4. Using the Calculator

Tips: Enter the total distribution amount and your total basis (after-tax contributions). Both values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What counts as basis in an IRA?
A: Basis includes all after-tax contributions you've made to traditional IRAs. It doesn't include earnings or pre-tax contributions.

Q2: Is the entire distribution always taxable?
A: No, only the portion that exceeds your basis is taxable. If your basis is greater than the distribution, none of it is taxable.

Q3: How do I track my IRA basis?
A: You should track your after-tax contributions on IRS Form 8606 for each year you make them.

Q4: Are Roth IRA distributions treated differently?
A: Yes, qualified Roth IRA distributions are completely tax-free as long as you meet the holding period requirements.

Q5: What if I have multiple IRAs?
A: The basis is aggregated across all your traditional IRAs. You can't isolate basis to a specific IRA when taking distributions.