How to Calculate the Taxable Amount of an IRA Withdrawal

By Motley Fool Staff – Updated Apr 29, 2025 at 11:51PM

Key Points

Traditional IRA withdrawals are taxable if initial contributions were deductible.
Roth IRA withdrawals are tax-free if conditions like age and holding period are met.
Nonqualified Roth withdrawals tax investment gains, not original contributions.
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Depending on the type of individual retirement account (IRA) you own, when you made your withdrawal, and whether your contributions were deductible, the taxable amount of an IRA withdrawal can vary significantly. Here's what you need to know to calculate the taxable amount of any withdrawal from a traditional or Roth IRA.

An infographic explaining how to calculate the taxable amount of a withdrawal from different types of IRAs.

Image source: The Motley Fool

Withdrawals from a traditional IRA

If all your contributions to your traditional IRA were tax-deductible, the calculation is simple: All of your IRA withdrawals will be counted as taxable income. If you had any nondeductible contributions (uncommon), the calculation gets a little more complicated.

You'll need to figure out how much of your account is made up of nondeductible contributions. Take the total amount of nondeductible contributions and divide it by the current value of your traditional IRA account -- this is the nondeductible (nontaxable) portion of your account.
Next, subtract this amount from the number 1 to arrive at the taxable portion of your traditional IRA.
Finally, multiply this number by the amount you withdrew from your traditional IRA. This is the taxable amount of your withdrawal.

For example, if you have a $100,000 traditional IRA and have made $15,000 in nondeductible contributions over the years, the nondeductible portion is 0.15. Subtracting this from 1 gives you 0.85 for the taxable portion of the account. If you decide to withdraw $10,000, multiplying that by 0.85 gives you a taxable IRA withdrawal amount of $8,500.

Withdrawals from a Roth IRA

Since Roth IRA contributions are made on an after-tax basis, qualified withdrawals are completely tax-free. A "qualified" Roth IRA withdrawal includes:

A withdrawal of your original contributions at any time, for any reason
Any withdrawal from your account after you turn 59 1/2 years old and your account has been opened for five years or more

If neither of these applies, your Roth IRA withdrawal is generally considered a nonqualified withdrawal, and any investment gains are taxable (but not your original contributions). There are three exceptions: You are disabled, you withdrew up to $10,000 to buy a first home, or the withdrawal was paid to your beneficiaries after death.

If you make a nonqualified Roth withdrawal, here's how to figure out the taxable portion.

First, add up all the contributions you've made to your Roth IRA since opening the account. Then, subtract any prior withdrawals of your contributions you've made. This represents the portion of your account that can be withdrawn tax-free at any time. Finally, deduct this amount from the amount of your Roth IRA withdrawal to calculate the taxable amount.