Roth IRA Withdrawal Taxation
A client withdraws $30,000 from her Roth IRA in 2026. The account consists of $20,000 in contributions and $10,000 in earnings. She is age 45 and does not meet any exception to the early withdrawal penalty.
How will the $30,000 distribution be treated for tax purposes?
- Entire amount is tax-free and penalty-free
- Contributions are tax-free; earnings are taxable and subject to a 10% penalty
- Entire amount is taxable but not subject to penalty
- Entire amount is taxable and subject to penalty
