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

IRA interestYou 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)

More Help with IRA Interest Tax

Investment income poses special considerations come tax time. Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to find every tax credit and deduction you are entitled to.

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