For example - Let’s say I deposit 00 in Roth in 2005 and by 2010 I earn 00 on it as interest or whatever. Now, if I withdraw (no exemptions) now, will I be paying the 10% penalty on 00 or the whole 00? Will I be paying 0 or 0 in penalty?
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{ 3 comments… read them below or add one }
You will pay the10% penalty on your earnings and you will pay taxes on your earnings at your marginal rate. Since you have paid taxes on the contributions, there are no further taxes or penalties to pay there.
It’s just on the earnings. You’ve already paid taxes on your contributions.
you paid 10% on 1000
because 5000 is yours, so IRS can’t touch on that.
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