Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income

Interest Income

IRA Interest

Generally interest on a Roth IRA is not taxable. However, if the criteria for the distribution are not followed, the interest is taxable.

Interest on a traditional IRA is tax-deferred. Do not include that interest in taxable income until the taxpayer makes withdrawals from the IRA. The taxpayer will be issued Form 1099-R to report a distribution. See the lesson on Retirement income for the proper way to report this income.

See Publication 17 and Publication 590 for more information on IRAs.

Example

Mike holds a traditional IRA to which he makes contributions each year. Throughout the year, he gets statements listing the interest earned. He does not report any of the interest income on his traditional IRA on his tax return.