1 Withdrawals of earnings are free from federal income tax, provided the Roth IRA has been in existence for five years and you are at least 59½. 2 Contributions can be withdrawn anytime without federal income taxes or penalties.3 RMDs (Required Minimum Distribution) are not required. 1 Withdrawals of earnings are free from federal income tax, provided the Roth IRA has been in existence for five years and you are at least 59½.
2 Contributions can be withdrawn anytime without federal income taxes or penalties.
3 RMDs (Required Minimum Distribution) are not required.
In contrast to a traditional IRA, contributions to a Roth IRA are not tax-deductible. Withdrawals are generally tax-free, but not always and not without certain stipulations (i.e., tax-free for principal withdrawals and the owner's age must be at least 59½ for tax-free withdrawals on the growth portion above principal). 1 Direct contributions to a Roth IRA (principal) may be withdrawn tax and penalty-free at any time. 2  Earnings may be withdrawn tax and penalty-free after 5 years if the condition of age 59½ (or other qualifying condition) is also met. If you contribute to your traditional IRA by April 17th, you may be able to claim a tax deduction on your tax return for the amount contributed. Roth IRA contributions, however are not tax deductible since the qualified distributions are tax-free. You can contribute to your Roth IRA if your modified AGI is less than: 1  $179,000 for married filing jointly or qualifying widow(er),  A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA. You cannot deduct contributions to a Roth IRA. If you satisfy the requirements, qualified distributions are tax-free. You can make contributions to your Roth IRA after you reach age 70 ½. You can leave amounts in your Roth IRA as long as you live. The account or annuity must be designated as a Roth IRA when it is set up.  For example, if someone has contributed $10,000 post-tax and $30,000 pre-tax to a traditional IRA and wants to convert the post tax $10,000 into a Roth, the pro-rated amount (ratio of taxable contributions to total contributions) is taxable. 1 Direct contributions to a Roth IRA (principal) may be withdrawn tax and penalty-free at any time. 2  Earnings may be withdrawn tax and penalty-free after 5 years if the condition of age 59½ (or other qualifying condition) is also met. Roth IRAs: 1  Roth contributions (but not earnings) can be withdrawn penalty-and tax-free any time, even before age 59 ½. 2  five tax years after the first contribution, you can withdraw up to $10,000 of Roth earnings penalty-free to pay for qualified first-time homebuyer expenses. Traditional IRA contributions are tax deductible on both state and federal tax returns for the year you make the contribution, while withdrawals in retirement are taxed at ordinary income tax rates. Roth IRAs provide no tax break for contributions, but earnings and withdrawals are generally tax-free. Benefits of a Roth IRA. 1  Withdrawals of earnings are free from federal income tax, provided the Roth IRA has been in existence for five years and you are at least 59½. 2  Contributions can be withdrawn anytime without federal income taxes or penalties. 3  RMDs (Required Minimum Distribution) are not required. A Roth IRA is an individual retirement account that offers the opportunity for tax-free income in retirement. Annual contributions are taxed upfront and all earnings are federal tax-free when they are distributed according to IRS rules. This is much different than a Traditional IRA, which taxes withdrawals. The benefits of a Roth IRA are that your contributions can grow tax-free and you can generally make withdrawals tax-and penalty-free after you reach age 59½.  Roth IRA contributions are not taxed at the time you contribute the funds to your Roth IRA. However, your contributions come from post-tax income. You pay taxes on your income today, but not in the future. You paid tax on that income when you first contributed to the Roth IRA. If the withdrawal is made before age 59 and 1/2 and is only up to the amount that has been contributed to the Roth IRA then no income tax is charged. Withdrawals of contributions are tax-free. The only catch is that you pay income tax on your contributions upfront. Unlike the traditional IRA, which gives investors a tax deduction for the year the contribution is made, the Roth version lets savers contribute after-tax money today and withdraw principal and earnings tax-free at retirement. You get tax-free income in retirement. With Roth IRAs, savers get a tax-free stream of income in retirement. And it's not just the contributions that come out tax-free. Uncle Sam doesn't lay a finger on any of the earnings. It can be a pretty sweet deal when you're talking about decades of compounding.
https://en.wikipedia.org/wiki/Roth_IRA http://blog.turbotax.intuit.com/income-and-investments/401k-ira-stocks/the-tax-benefits-of-contributing-to-an-ira-7947/ https://www.irs.gov/retirement-plans/roth-iras https://en.wikipedia.org/wiki/Roth_IRA http://www.rothira.com/traditional-ira-vs-roth-ira https://www.tdameritrade.com/retirement-planning/ira-guide/roth-ira.page http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/roth_ira http://www.rothira.com/roth-ira-taxes-and-tax-issues http://www.bankrate.com/finance/retirement/advantages-of-roth-iras-1.aspx
tax benefit of roth ira contribution