With Tax Day just behind us, it seems like a good opportunity to focus on the type of retirement income the IRS almost never meddles with: tax-exempt income!
Tax-exempt income is any income that is not subject to federal, state, and/or local income. In this case, income sources that are considered to have been previously taxed and therefore, not subject to further taxation. So, here’s your “what you need to know” guide for Roth IRAs.
What is a Roth IRA?
A Roth IRA is a retirement account that has three essential features:
- The owner’s contributions are not tax-deductible;
- BUT, the assets in the account grow tax free over time;
- AND, the distributions taken from the account, generally speaking, are also tax-free once the owner reaches retirement age.