If I am age 50 or older, can I make a catch-up contribution to my IRA?
If you are age 50 or older, you may contribute an additional $1,100 for 2026 tax year to your Traditional or Roth IRA for that calendar year.
What should I do if my IRA contribution exceeded the maximum amount allowed?
A 6% excise tax may be assessed on an excess contribution if it remains in the IRA after the tax filing deadline plus extensions. If you file your tax return on time, you'll have an automatic six-month extension to make the withdrawal. If removed before tax filing deadline plus extensions, the excess contribution is not taxable. The earnings, however, are taxable in the year the excess contribution was made.
What happens if I don't remove the excess contribution and earnings in a timely manner?
If the excess contribution and earnings are not removed in a timely manner, the 6% excise tax will apply for the year the excess occurred and all subsequent years until the excess is either withdrawn or utilized as a contribution.
How is my Traditional IRA distribution taxed?
Generally, Traditional IRA distributions are taxable as ordinary income in the year withdrawn.
If you receive a distribution before age 59½, a 10% IRS early distribution penalty could apply to the distribution unless you meet one of the exceptions under Internal Revenue Code (IRC) Section 72(t). See the IRS Form 1099-R for more information.
Are there any exceptions to the 10% IRS early distribution penalty?
The IRS allows several exceptions to the 10% IRS early distribution penalty if you receive a distribution from your IRA before age 59½. Refer to “Exception to tax on early distributions” (IRS Website Page) for more detail. Below is an example of some exceptions identified:
See IRS Form 5329 for more information on how to report an exception to the 10% IRS early distribution penalty.
What is a required minimum distribution (RMD), and will it be taxed?
Required minimum distributions are the minimum amounts you must take from your Traditional IRA, SEP IRA, SIMPLE IRA and retirement plan accounts each year. Generally, the required beginning date is April 1st of the year following the calendar year you turn 73 and all other RMDs after your required beginning date must be taken by the end of each calendar year.
Your RMDs are typically taxed as ordinary income in the years you receive them. Unless you specify otherwise on your election form, 10% of your distribution will automatically be withheld as prepayment of federal income tax. (State withholding may also apply, depending on the product(s) owned and the state where you live.) The penalty for failure to meet your RMD is 25% of the amount not taken for that year, with the penalty reduced to 10% if fixed during the Correction Window, which begins on the date the tax is imposed, and ends at the earliest of: When the Notice of Deficiency is mailed to the taxpayer; When the tax is assessed by the IRS; Or the last day of the second tax year after the tax is imposed.
As a beneficiary of an IRA, how are my distributions taxed?
Traditional IRA distributions are taxable to the beneficiary as ordinary income for the year of the distribution. Inherited IRA distributions are exempt from the 10% IRS early distribution penalty, regardless of the age of the beneficiary or deceased owner. The penalty for failure to meet your RMD is 25% of the amount not taken for that year, with the penalty reduced to 10% if fixed during the Correction Window, which begins on the date the tax is imposed, and ends at the earliest of: When the Notice of Deficiency is mailed to the taxpayer; When the tax is assessed by the IRS; Or the last day of the second tax year after the tax is imposed. See IRS Publication 590-B—Individual Retirement Arrangements (IRAs) for more information.
How is my Roth IRA distribution taxed?
You must treat all your Roth IRAs as a single Roth IRA for purposes of determining the tax treatment of your distribution(s). All distributions are deemed to come from: Roth IRA contributions first, Roth IRA conversions second, and Roth IRA earnings third.
Roth IRA contributions are not deductible and, if requirements are satisfied, qualified distributions of earnings are not taxable.
Roth conversions were taxed for the year of conversion. Because of this, the amount of the conversion is not subject to income tax upon distribution from the Roth IRA.
The only portion of your Roth IRA distribution that may be subject to income tax is the amount of the distribution attributable to earnings. Earnings will not be subject to income tax upon distribution if:
Distribution of earnings that are not considered a “qualified distribution” will be subject to tax and may be subject to the 10% IRS early distribution penalty.
Note: Conversions and qualified rollover contributions, while not subject to income tax when distributed, may be subject to a 10% IRS early distribution penalty if a separate five-year requirement is not satisfied. See IRS Form 8606 instructions for information on the rules for determining your taxation. Because all your Roth IRAs must be aggregated, Thrivent Mutual Funds cannot determine the taxable amount of your distribution.
1 The 5-year period begins on January 1 of the year of the first contribution/conversion.
The information provided is not intended as a source for tax, legal or accounting advice. Please consult with a legal and/or tax professional for specific information regarding your individual situation.