All contributions to a Roth IRA are:
A) taxfree but earnings are taxable.
B) taxable but earnings are taxfree.
C) passive but withdrawals are taxfree.
D) taxfree but withdrawals are subject only to state taxes.

Question

All contributions to a Roth IRA are:
A) tax­free but earnings are taxable.
B) taxable but earnings are tax­free.
C) passive but withdrawals are tax­free.
D) tax­free but withdrawals are subject only to state taxes.

Quizplus · Accepted Answer

Contributions to a Roth IRA are made with after-tax dollars, meaning they are taxable in the year they are earned. However, any earnings on those contributions grow tax-free and withdrawals from a Roth IRA in retirement are also tax-free.

All Contributions to a Roth IRA Are