Do IRA Withdrawals Count as Income?

Money leaving an IRA is not always taxable income. For a Traditional IRA, the taxable portion counts as ordinary income; money you already paid tax on may come out tax-free. A qualified Roth IRA withdrawal adds no federal taxable income. An ordinary nonqualified Roth withdrawal can also be entirely tax-free if it does not reach earnings. Start with the taxable portion, not the amount deposited in your bank account.

This distinction matters for your tax bill and for income-based calculations such as Medicare premiums, Marketplace health-insurance assistance and Social Security taxation. It is a separate question from whether a withdrawal lets you make a new IRA contribution.

Traditional IRA: count the taxable portion

If you have no after-tax basis across your Traditional IRAs, an ordinary cash withdrawal is fully taxable as ordinary income. But not every Traditional IRA withdrawal is fully taxable. Nondeductible contributions and after-tax money rolled into the IRA create basis: money already taxed that is not taxed again when properly recovered. Valid tax-free rollovers and qualified charitable distributions also have their own rules.

For an ordinary withdrawal with basis, Form 8606 generally allocates part of the withdrawal to basis across your Traditional IRAs, including non-Roth SEP and SIMPLE IRAs. You cannot normally choose to withdraw only the after-tax dollars from one of those accounts. Roth IRAs are calculated separately.

A simple example: assume you have $10,000 of unrecovered basis, $90,000 left in your Traditional IRAs at year-end, and one $10,000 ordinary withdrawal during the year. There are no other distributions, conversions, rollovers, contributions or special adjustments. The basis share is $10,000 ÷ ($90,000 + $10,000) = 10%. Of the withdrawal, $1,000 is tax-free basis and $9,000 is taxable income. Your remaining basis is $9,000. See Publication 590-B, chapter 1, “Distributions Fully or Partly Taxable”.

The taxable portion enters adjusted gross income (AGI), a subtotal on your federal return. Your tax brackets apply to taxable income, which is calculated after deductions, not simply to AGI. Different programs then calculate their own version of modified adjusted gross income (MAGI).

Where that income can matter

• Medicare premiums: IRMAA, the income-related surcharge on Part B and Part D premiums, uses AGI plus tax-exempt interest. For 2026 premiums, the first surcharge begins above $109,000 for a single filer or $218,000 for married filing jointly, generally using the 2024 tax return. A withdrawal in 2026 normally matters for a later premium year, not automatically for 2026 premiums. Separate rules apply to some married people filing separately. Sources: CMS's 2026 premium tables and Social Security's income and lookback explanation.
• Marketplace health insurance: the taxable portion of an IRA withdrawal enters the household-income calculation and can change the premium tax credit. A qualified Roth withdrawal does not enter that calculation. Household size, other income and eligibility rules still matter; there is no single MAGI rule for every benefit program. Source: IRS premium tax credit Q&A 8.
• Social Security: taxable IRA income can cause more of your benefits to be included in taxable income. The calculation generally includes half your Social Security benefits, other income and tax-exempt interest, with specified adjustments. The familiar thresholds are $25,000 and $34,000 for single filers, or $32,000 and $44,000 for joint filers. They lead to up to 50% or 85% of benefits being taxable — not a 50% or 85% tax rate, and not an automatic jump to that percentage. Married-filing-separately rules can differ. Source: Publication 915, “Are Any of Your Benefits Taxable?” and “How Much Is Taxable?”.
• Net Investment Income Tax: IRA distributions themselves are not net investment income. Their taxable portion can, however, raise MAGI and expose other investment income to the 3.8% tax. The thresholds include $200,000 for single filers and $250,000 for joint filers. Source: IRS NIIT questions and answers.

Qualified Roth withdrawal: no taxable income

A qualified Roth IRA distribution meets both tests: the five-tax-year period has been completed, and the payment is made after age 59½, because of qualifying disability, after the owner's death, or for a qualifying first home within the $10,000 lifetime limit. The five-tax-year period starts January 1 of the first tax year for which a contribution, including a conversion, was made to any Roth IRA set up for you. It is not a new five-year wait every time you open another Roth IRA. Inherited Roth accounts use the deceased owner's period. Sources: Publication 590-B, chapter 2, and the five-year-rule guide.

Once the distribution is qualified, neither its contributions nor its earnings add to federal AGI. That means the withdrawal itself does not increase the Medicare, Marketplace or Social Security income measures discussed above. This is not a promise about every state tax or benefits program.

Tax-free does not mean invisible paperwork. A qualified withdrawal is still reported by the custodian on Form 1099-R. Under the current final 2025 Form 1040 instructions, lines 4a–4c, Roth gross distributions are reported on line 4a; the qualified portion adds nothing to taxable line 4b. Follow the final instructions for the tax year you file rather than assuming the 2026 return fields are already final.

Nonqualified Roth withdrawal: follow the layers

“Nonqualified” does not mean the whole withdrawal is taxable. For an ordinary owner's withdrawal, the ordering rules apply across your own Roth IRAs, not just the one sending the payment. An inherited Roth IRA has separate aggregation rules and is not combined with your own Roth IRAs. The ordinary owner ordering is:

1. Regular contributions come out first. Recovery of your remaining regular-contribution basis is free of income tax and the 10% early-distribution tax.
2. Conversions and rollovers from non-Roth workplace-plan accounts come next, by year, oldest first. Within each year's bucket, the amount included in income at conversion or rollover comes before its nontaxable portion. Principal is not taxed as income again. If you are under 59½, withdrawing the previously taxable portion within its separate five-tax-year period can trigger the 10% additional tax unless an exception applies. The nontaxable portion does not acquire that recapture tax merely because it was converted.
3. Earnings come last. Nonqualified earnings are generally taxable as ordinary income. An additional 10% tax can also apply before age 59½ unless an exception applies. At 59½ or older, earnings can still be taxable if the Roth qualification clock is unfinished, even though the age-based additional tax no longer applies.

Roth workplace-plan rollovers are different. When money rolls from a Roth 401(k) or other designated Roth plan account, the plan-basis portion joins the first layer. If that plan distribution was qualified, the entire rolled-over amount joins that layer; otherwise, rolled-over earnings remain earnings. This affects withdrawal ordering, not your annual contribution allowance. Sources: Treasury Regulation §1.408A-10, Q&A-3, and 2025 Form 8606 instructions, lines 22 and 24.

These are the ordinary ordering rules. Timely excess-contribution corrections, certain special distributions and QCDs have separate rules. Use Form 8606, Part III, and, when applicable, Form 5329 to work out the taxable amount and additional tax. A penalty exception does not by itself make otherwise-taxable earnings income-tax-free. See the early-withdrawal tax and its exceptions.

A QCD can exclude otherwise-taxable income

A qualified charitable distribution (QCD) is a qualifying payment directly from an eligible IRA to an eligible charity when the individual is at least 70½ on the distribution date. The 2026 annual exclusion cap is $111,000 per taxpayer across eligible IRAs, not per account. The excluded amount is limited to otherwise-taxable money and may be reduced by deductible IRA contributions for tax years ending on or after the date the individual reaches 70½, after allowing for reductions already used. An ongoing SEP or SIMPLE IRA is not eligible; donor-advised funds and supporting organizations are not eligible recipients. Other recipient and substantiation conditions apply, and the excluded QCD cannot also be claimed as a charitable deduction.

A Roth IRA is eligible too. An already-qualified Roth withdrawal is tax-free without the QCD rule, so it gets no extra QCD income exclusion. But a nonqualified Roth can contain otherwise-taxable earnings. Under the special taxable-first allocation rule in IRC §408(d)(8)(D), an eligible charitable payment can reach those earnings without first requiring a personal withdrawal of all contribution basis. It is not the ordinary contributions-first calculation described above; basis and other distributions must be adjusted consistently.

A QCD can count toward the applicable IRA distribution requirement, but an original Roth IRA owner has no lifetime RMD. A Roth payment cannot satisfy an RMD from a separate Traditional IRA. Eligible inherited IRAs have their own payout rules. For the full conditions and examples, see QCDs from a Roth IRA. Primary authorities: Notice 2007-7, Q&As 35–37 and 42, IRC §408(d)(8), and Notice 2025-67, page 5, for the 2026 cap.

Income for taxes is not compensation for IRA contributions

An IRA withdrawal does not itself create the compensation needed for a new regular IRA contribution. Compensation usually comes from wages or net self-employment income, but the IRS recognizes additional categories. If you file jointly, an eligible spouse's compensation can support a spousal IRA contribution, subject to the usual limits.

For example, a single retiree with $50,000 of taxable Traditional IRA withdrawals and no qualifying compensation cannot make a regular IRA contribution on the strength of those withdrawals alone. The $50,000 is income for tax purposes, not IRA compensation. Rollovers and conversions follow separate rules. Source: Publication 590-A, “What Is Compensation?” and “Kay Bailey Hutchison Spousal IRA Limit”.

Corrections and updates

September 26, 2026 — Correction: Earlier wording treated all Traditional IRA withdrawals as fully taxable and wrongly excluded Roth IRAs from QCD eligibility. This article now distinguishes taxable amounts from basis and qualifying exclusions, explains Roth QCD allocation and corrects the conversion-penalty conditions. It also corrects the Roth five-year timing, the Social Security threshold explanation and the contribution-eligibility example, and separates Medicare's premium year from its income lookback. Return references identify the final form edition. Public correction record.