Question
Am I subject to IRA interest tax on the interest my IRA earns, or am I only subject to IRA interest tax if I take an IRA distribution?
Answer
You aren’t subject to IRA interest tax on the interest your IRA earns while it remains in your account. Instead, you’ll be responsible for any IRA interest tax when you take distributions from the traditional IRA.
If you have Roth IRA distributions, they’re tax-free if both of these are true:
- You held the account for five years.
- You take the distribution for one of these reasons:
- Over age 59 1/2
- Death or disability
- Using the distribution as a qualified first-time homebuyer (up to a $10,000 lifetime limit)
Related Resources
Farmer’s Market Tax Tips
If you are selling items at a farmer's market, learn how to file your taxes with H&R Block. From cash income to bartering, these tax tips will help.
