Yes, an IRA withdrawal generally counts as income, but the type of IRA controls almost everything about how it hits your tax return. Money pulled from a traditional IRA is treated as ordinary income and taxed at the same rates as your wages. Money pulled from a Roth IRA is usually not income at all, as long as you meet a couple of timing rules. The size of the tax bill, any penalty, and the ripple effects on Social Security and Medicare all follow from that basic split.
Traditional IRA Withdrawals Are Ordinary Income
Traditional IRA contributions typically reduced your taxable income the year you made them, so the IRS collects on the way out. Every dollar you withdraw is included in your gross income and taxed at your regular income tax rates.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts The distribution stacks on top of your other earnings for the year, which can push part of your income into a higher bracket if the withdrawal is large.
There is one exception that trips people up. If you ever made nondeductible contributions to a traditional IRA, those after-tax dollars are not taxed a second time when they come out. You cannot pick which dollars leave the account, though. The IRS applies a pro-rata rule that treats every distribution as a proportional mix of pre-tax and after-tax money based on the ratio across all your traditional IRAs combined.2Internal Revenue Service. Rollovers of After-Tax Contributions in Retirement Plans If 80 percent of your combined traditional IRA balance came from deductible contributions and earnings, then 80 percent of any distribution is taxable, no matter which account you draw from. Form 8606 tracks this and calculates the nontaxable share.3Internal Revenue Service. Instructions for Form 8606
Roth IRA Withdrawals Are Usually Not Taxable Income
Roth IRAs work the opposite way. You already paid tax on the money going in, so the IRS lets you pull your original contributions back out at any time, at any age, without owing income tax or penalty. Distributions are treated as coming from contributions first, then conversions, and finally earnings, which means you can access a large portion of your Roth without any tax consequence.4Internal Revenue Service. Publication 590-B (2025), Distributions From Individual Retirement Arrangements (IRAs)
Earnings can also come out tax-free, but only if the withdrawal is qualified. That requires two things at once: the account has been open at least five tax years, and you are at least 59½ (or the distribution is due to disability, death, or a first-time home purchase up to $10,000).5Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs Pull earnings before meeting both conditions and that portion becomes ordinary income, potentially with a penalty on top. The contribution portion is never taxed, regardless of age or how long the account has existed.
The 10 Percent Early Withdrawal Penalty
If you take a taxable distribution from a traditional IRA before turning 59½, the taxable portion is hit with an additional 10 percent tax on top of the regular income tax.6Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts On a $20,000 withdrawal in the 22 percent bracket, that means roughly $4,400 in federal income tax plus another $2,000 penalty.
Congress has written a long list of exceptions where the penalty is waived, even though the distribution still counts as taxable income. The commonly used ones include total and permanent disability, distributions to a beneficiary after the owner’s death, unreimbursed medical expenses above 7.5 percent of adjusted gross income, up to $10,000 for a first-time home purchase, qualified higher education expenses, health insurance premiums while unemployed, substantially equal periodic payments, up to $22,000 for a federally declared disaster, up to $5,000 for a birth or adoption, one emergency personal expense per year up to $1,000, and up to $10,000 or 50 percent of the balance for domestic abuse victims.7Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions The emergency, domestic abuse, and birth-or-adoption exceptions took effect after December 31, 2023. One separate trap: SIMPLE IRA withdrawals in the first two years of participation carry a 25 percent penalty rather than 10.
Required Minimum Distributions Count Too
You cannot leave money in a traditional IRA forever to avoid the income tax. Starting the year you turn 73, you must take required minimum distributions each year, and every RMD is included in your gross income and taxed as ordinary income.8Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Under the SECURE 2.0 Act, that age rises to 75 beginning in 2033. You can delay your first RMD until April 1 of the following year, but doubling up two RMDs into one calendar year often pushes income into a higher bracket.
Missing an RMD triggers a 25 percent excise tax on the shortfall, dropping to 10 percent if you correct it within two years.9Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans Roth IRAs have no RMDs during the original owner’s lifetime.
How a Taxable Withdrawal Ripples Through Other Bills
Because a traditional IRA distribution raises your adjusted gross income, the effects reach beyond your income tax line. This is where a moderate withdrawal can create bills you did not plan for.
Social Security Becomes More Taxable
If your combined income (adjusted gross income plus nontaxable interest plus half your Social Security benefits) tops $25,000 as a single filer or $32,000 on a joint return, up to 50 percent of your Social Security benefits become taxable. Past $34,000 (single) or $44,000 (joint), up to 85 percent can be taxed.10Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits Those thresholds are not indexed for inflation. A traditional IRA withdrawal feeds straight into that calculation; a qualified Roth withdrawal does not.
Medicare Premiums Can Jump
Medicare bases your Part B and Part D premiums on your modified adjusted gross income from two years earlier. A large IRA distribution that pushes 2026 income above $109,000 (single) or $218,000 (joint) triggers an income-related monthly adjustment amount on top of the standard premium. Part B surcharges for 2026 range from $81.20 to $487.00 per month, meaning the highest bracket pays a total Part B premium of $689.90 instead of the standard $202.90.11Centers for Medicare & Medicaid Services. 2026 Medicare Parts B Premiums and Deductibles Part D carries its own surcharge on the same brackets. The increase applies for a full year.
Net Investment Income Tax
IRA distributions themselves are not classified as net investment income, so the 3.8 percent Net Investment Income Tax does not apply directly to the withdrawal.12Internal Revenue Service. Questions and Answers on the Net Investment Income Tax The withdrawal still raises your modified adjusted gross income, though. If that pushes you above $200,000 (single) or $250,000 (joint), the NIIT hits your dividends, capital gains, and other investment income that would otherwise have stayed below the line.13Internal Revenue Service. Net Investment Income Tax
Withholding and Rollovers
When you request a traditional IRA distribution, the custodian withholds 10 percent for federal income tax by default. You can raise or lower that rate, from 0 to 100 percent, using Form W-4R.14Internal Revenue Service. Pensions and Annuity Withholding Ten percent is often not enough. In the 22 or 24 percent bracket, especially with state income tax on top, the default withholding leaves a balance due at filing time.
If you are just moving money between accounts and do not need to spend it, a direct trustee-to-trustee transfer avoids tax and withholding entirely. If you receive the check yourself, you have 60 days to deposit the funds into another eligible IRA or retirement plan; complete that rollover in time and the distribution is not included in gross income.15Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions Miss the 60-day window and the whole amount becomes taxable that year, plus the early withdrawal penalty if you are under 59½. You are also limited to one IRA-to-IRA rollover in any 12-month period across all your IRAs.
How the Withdrawal Shows Up on Your Tax Return
Your custodian sends Form 1099-R after any year you took a distribution. Box 1 shows the gross amount, Box 2a shows the taxable amount (often the same figure for a fully deductible traditional IRA), and Box 7 carries a code identifying the type of withdrawal. The IRS gets a copy, so your return needs to match.16Internal Revenue Service. Instructions for Forms 1099-R and 5498
On Form 1040, the gross distribution goes on Line 4a and the taxable portion on Line 4b.17Internal Revenue Service. Instructions for Form 1040 (2025) If you had nondeductible contributions, Form 8606 works out the tax-free share and the result flows to Line 4b.3Internal Revenue Service. Instructions for Form 8606 For a qualified Roth distribution, the gross amount goes on Line 4a and Line 4b is typically zero.
State income tax is a separate question. Most states with an income tax treat traditional IRA distributions as taxable, though several offer partial exemptions for retirement income tied to age, and a handful of states have no income tax at all. Check your state’s rules before assuming the federal treatment is the whole story.