Do You Pay Taxes on an IRA? Traditional, Roth, and Inherited

Yes, you pay taxes on an IRA, but when you pay depends on the type of account. With a traditional IRA, contributions may be deductible now and withdrawals are taxed as ordinary income later. With a Roth IRA, you pay tax on the money going in and qualified withdrawals come out tax-free. For 2026, you can contribute up to $7,500 across your IRAs, or $8,600 if you are 50 or older, and income-based rules decide whether you can deduct a traditional contribution or contribute directly to a Roth at all.¹

Traditional IRA: Taxes on Money Going In

Traditional IRAs are built around pre-tax contributions. When you put money in, you may be able to deduct the contribution from your taxable income for that year.² Whether you actually get that deduction turns on two questions: does a workplace retirement plan cover you or your spouse, and how much do you earn?

If neither you nor your spouse is covered by a workplace plan, you can deduct the full contribution regardless of income.³ If you are covered by one, the deduction phases out within income ranges set each year. For 2026, based on modified adjusted gross income (MAGI):

Single filers covered by a workplace plan: deduction phases out between $81,000 and $91,000.
Married filing jointly, contributing spouse covered: $129,000 to $149,000.
Married filing jointly, contributing spouse not covered but the other spouse is: $242,000 to $252,000.
Married filing separately, covered by a workplace plan: $0 to $10,000.

Fall inside the range and you get a partial deduction. Above the top of the range, the deduction is gone.¹

Non-Deductible Contributions

You can still contribute to a traditional IRA when your income is too high for a deduction. The contribution simply goes in as non-deductible, meaning you have already paid tax on that money. To keep the IRS from taxing those dollars a second time when you withdraw them, file Form 8606 for every year you make a non-deductible contribution. The form tracks your basis, the running total of after-tax money you have put in. Skip it and you face a $50 penalty plus the risk of losing proof of your basis, which can mean paying tax twice on the same money.⁴

Traditional IRA: Taxes on Money Coming Out

Distributions from a traditional IRA are taxed as ordinary income.⁵ The amount you take out gets added to your other income for the year and taxed at your marginal bracket. Many retirees end up in the 12 or 22 percent bracket, but a large single-year withdrawal can push you higher.

If you have made non-deductible contributions and tracked them on Form 8606, a portion of each withdrawal comes out tax-free as a return of basis. You do not get to choose that portion, though. The IRS applies a pro-rata calculation across all your traditional IRA balances to figure out how much of any distribution is taxable.⁴

Required Minimum Distributions

You cannot leave money in a traditional IRA indefinitely. Starting at age 73, you must take a Required Minimum Distribution (RMD) each year.⁶ Your first RMD is due by April 1 of the year after you turn 73; each one after that is due by December 31. Under the SECURE 2.0 Act, the starting age rises to 75 for people who turn 73 after December 31, 2032.

Miss an RMD or take less than the required amount, and the IRS charges a 25 percent excise tax on the shortfall. That drops to 10 percent if you correct the mistake within two years.⁷

Qualified Charitable Distributions

If you are 70½ or older, you can transfer up to $111,000 per person directly from your traditional IRA to a qualified charity in 2026.⁸ The amount counts toward your RMD but stays out of your taxable income. For retirees who do not itemize, a Qualified Charitable Distribution (QCD) is often the most tax-efficient way to give and satisfy the RMD in one move.

Roth IRA: Taxes Going In and Coming Out

Roth IRAs run in the opposite direction. Contributions are made with money you have already paid tax on, so there is no deduction the year you contribute.⁹ The payoff comes later, when qualified withdrawals, including all the investment growth, come out completely tax-free.

Direct Roth contributions are subject to income limits. For 2026, the ability to contribute phases out between $153,000 and $168,000 of MAGI for single filers, and between $242,000 and $252,000 for married couples filing jointly.¹ Above those ranges, you cannot contribute directly, though conversions from a traditional IRA remain available at any income.

When Withdrawals Are Tax-Free

A Roth withdrawal is tax-free and penalty-free when two conditions are both met: the account has been open at least five tax years, and you are at least 59½.⁹ The five-year clock starts January 1 of the year you first contributed to any Roth IRA, not the year of the specific withdrawal. Once both conditions are satisfied, everything that comes out is tax-free, including decades of earnings.

Getting Contributions Back Early

Because you already paid tax on the money going in, you can withdraw your original Roth contributions at any age, at any time, without owing tax or penalty.⁹ The IRS treats Roth distributions as coming from contributions first and earnings second. Only the earnings portion is exposed to tax and penalty when withdrawn before you meet the qualified distribution requirements.

No Lifetime RMDs

Roth IRAs do not require the original owner to take distributions during their lifetime.⁹ You can leave the entire balance in place and let it grow tax-free for as long as you live.

The 10 Percent Early Withdrawal Penalty

Take money out of an IRA before age 59½ and you generally owe a 10 percent additional tax on top of any regular income tax.¹⁰ For a traditional IRA distribution, that stacks on top of ordinary income tax. For a Roth IRA, the penalty applies only to the earnings portion of an early withdrawal, since contributions come out first without tax or penalty.

Several exceptions waive the 10 percent penalty even when you are under 59½:¹¹

First-time home purchase, up to $10,000 per lifetime.
Higher education expenses for you, your spouse, children, or grandchildren.
Unreimbursed medical expenses above 7.5 percent of your adjusted gross income.
Total and permanent disability as defined by the IRS.
Distributions taken to satisfy an IRS levy against the account.
Substantially equal periodic payments taken for at least five years or until 59½, whichever is longer.
Emergency personal expenses under SECURE 2.0, one withdrawal per calendar year up to the lesser of $1,000 or your vested balance above $1,000.

An exception waives the penalty only. Traditional IRA distributions taken under one of these exceptions are still ordinary income for the year.

Roth Conversions

Converting money from a traditional IRA to a Roth IRA moves funds from the tax-deferred side to the tax-free side. There is no income limit on conversions, which is why higher earners sometimes use a “backdoor Roth” strategy of contributing to a non-deductible traditional IRA and then converting. The converted amount is included in your gross income for the year, minus any portion representing after-tax contributions.¹²

The Pro-Rata Rule

If you hold both deductible and non-deductible dollars across your traditional IRAs, you cannot cherry-pick the after-tax portion to convert. The IRS treats all your traditional IRAs as one pool and applies a pro-rata calculation.⁴ Say your traditional IRAs hold $100,000 total, of which $7,000 is non-deductible basis. Your basis is 7 percent of the pool. Convert $7,000, and only 7 percent ($490) is tax-free; the remaining $6,510 is taxable. The pro-rata rule does not apply to direct rollovers from a 401(k) or 403(b) into a Roth IRA, since employer plan balances are not counted in the IRA pool.

Five-Year Rule for Conversions

Each Roth conversion starts its own five-year clock for penalty-free access to the converted amount. Withdraw converted funds before five years have passed while under 59½, and the 10 percent penalty may apply to the portion that was taxable at conversion, even though you already paid income tax on it. Once you reach 59½, the penalty no longer applies regardless of when the conversion occurred.

Excess Contribution Penalty

Contribute more than the annual limit, or contribute to a Roth when your income disqualifies you, and the IRS imposes a 6 percent excise tax on the excess for every year it remains in the account.¹³ To avoid it, withdraw the excess contribution plus any earnings on it by your tax-filing deadline, including extensions, which is generally October 15 of the following year. Earnings withdrawn with the correction are taxed as ordinary income and may face the 10 percent penalty if you are under 59½. Report excess contribution penalties on Form 5329.¹⁴

Taxes on an Inherited IRA

When the account owner dies, tax treatment depends on who inherits and which type of IRA it was.

Surviving Spouses

A surviving spouse has the most flexibility. They can roll the inherited IRA into their own IRA and treat it as if it were always theirs, or remain as a beneficiary and take distributions under the standard beneficiary rules. Distributions from an inherited traditional IRA are ordinary income. Distributions from an inherited Roth IRA are generally tax-free as long as the five-year aging requirement has been met.¹⁵

Non-Spouse Beneficiaries and the 10-Year Rule

Most non-spouse beneficiaries who inherited an IRA from someone who died in 2020 or later must empty the account by December 31 of the tenth year after the owner’s death.¹⁵ There is no set annual amount inside that window; you just have to reach zero by the deadline. Distributions from an inherited traditional IRA count as ordinary income in the year received.

Some beneficiaries qualify as “eligible designated beneficiaries” and can instead stretch distributions over their own life expectancy:¹⁵

Minor children of the deceased, until they reach the age of majority, when the 10-year clock begins.
Disabled or chronically ill individuals.
Beneficiaries no more than 10 years younger than the original owner.

Inherited Roth IRAs

Inherited Roth IRAs follow the same distribution timeline rules, either the 10-year rule or the life-expectancy method depending on the beneficiary. Contributions always come out tax-free, and earnings are tax-free as long as the Roth was open at least five years before the original owner’s death.¹⁵ If the five-year requirement was not met, earnings may be subject to income tax.

State Taxes on IRA Withdrawals

Federal rules are only half the picture. Most states also tax traditional IRA distributions as ordinary income, with rates ranging from under 1 percent to over 13 percent. Roughly a dozen states impose no income tax on retirement distributions at all, either because they have no state income tax or because they specifically exempt retirement income. Several others offer partial exemptions that often kick in at a certain age. Check your own state’s rules before planning a large withdrawal.

1
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
2
Office of the Law Revision Counsel. 26 USC 219 – Retirement Savings
3
Internal Revenue Service. IRA Deduction Limits
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Internal Revenue Service. Instructions for Form 8606
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Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts – Section: Tax Treatment of Distributions
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Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
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Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
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Internal Revenue Service. Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs
9
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
10
Internal Revenue Service. Substantially Equal Periodic Payments
11
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
12
eCFR. 26 CFR 1.408A-4 – Converting Amounts to Roth IRAs
13
Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts
14
Internal Revenue Service. About Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
15
Internal Revenue Service. Retirement Topics – Beneficiary