why is traditional ira withdrawal taxable
Traditional IRA contributions are tax deductible on both state and federal tax returns for the year you make the contribution, while withdrawals in retirement are taxed at ordinary income tax rates. Roth IRAs provide no tax break for contributions, but earnings and withdrawals are generally tax-free.hatâs because it determines whether the tax rate you pay on your Roth IRA contributions (todayâs tax rate) is higher or lower than what youâd pay on your traditional IRAâs withdrawals in retirement. Of course, itâs hard to predict what federal and state tax rates will be 10, 20 or even 40 years from now.