The order in which amounts attributed to contributions, conversions and earnings are considered to be distributed from a Roth IRA.
The ordering rules are applied when a distribution from a Roth IRA is not a qualified distribution, and helps to determine the portion of the nonqualified distribution that is subject to income tax and/or the early distribution penalty.
According to the ordering rules, distributions from a Roth IRA occur in the following order:
- From regular contributions first. After all regular contributions have been distributed , then
- From conversion amounts, on a first-in-first-out basis; and after all conversion amounts have been distributed,
- From earnings
For amounts attributed to conversions, if the conversion included taxable and nontaxable amounts, the distribution is deemed to occur from the taxable portion first.
IRC §408A(d)(4); Treas. Reg. §1.408A-6, Q&A-8;
Additional Helpful Information
For purposes of the ordering rules, additional rules apply, which include the following :
- Distributions from all an individual’s Roth IRAs made during a taxable year are aggregated.
- All regular contributions made for the same taxable year to all the individual’s Roth IRAs are aggregated and added to the undistributed total regular contributions for prior taxable years.
- All conversion contributions received during the same taxable year by all the individual’s Roth IRAs are aggregated.
- A distribution from an individual’s Roth IRA that is rollover eligible, and rolled over within the 60-day period is disregarded