Non-Qualified Distribution

AAA

DEFINITION of 'Non-Qualified Distribution'

1) A distribution from a Roth IRA that occurs before the Roth IRA owner meets certain requirements (see definition for qualified distributions).

2) A distribution from an education savings account that exceeds the amount used for qualified education expenses.

INVESTOPEDIA EXPLAINS 'Non-Qualified Distribution'

Typically, when a distribution is non-qualified, the amount attributable to earnings will be subject to income tax and an early-distribution penalty of 10%.

RELATED TERMS
  1. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  2. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  3. Recharacterization

    The treatment of a contribution as being made to another type ...
  4. IRA Adoption Agreement And Plan ...

    A contract between the owner of an individual retirement account ...
  5. Ordering Rules

    The order in which Roth IRA assets are distributed. Assets are ...
  6. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
RELATED FAQS
  1. What are the exceptions to the early distribution penalty for a non-qualified Roth ...

    The exceptions are as follows: The distribution is made on or after the date you reach age 59.5 The distribution is made ... Read Full Answer >>
  2. What are the tax consequences of a Roth IRA distribution if the IRA holder is younger ...

    The tax treatment of a Roth IRA distribution depends on whether the distribution is qualified. Qualified distributions from ... Read Full Answer >>
Related Articles
  1. Taxes

    Tax Treatment Of Roth IRA Distributions

    Learn the requirements for withdrawing funds tax and penalty free.
  2. Taxes

    9 Penalty-Free IRA Withdrawals

    If you need to take early distributions, find out which exemptions allow you to avoid expensive consequences.
  3. Retirement

    A Closer Look At The Roth 401(k)

    Learn about the benefits and drawbacks of this new investment account and see if it's right for you.
  4. Retirement

    Tax Relief For Katrina Victims

    Find out if you qualify for the assistance offered to hurricane survivors by the U.S. government.
  5. Professionals

    New 401(k) Pension Rollover Rule: Pros and Cons

    Is the new rule allowing participants to roll their 401(k) balances into pensions a good idea?
  6. Retirement

    Strategies To Build Your Retirement Portfolio

    Retirement indexes are designed to estimate how much an investor would need to have saved today to generate annual income in retirement, starting at 65.
  7. Professionals

    Why Auto-Enrollment Will Save Your Retirement

    Savers need all the help they can get, even if it amounts to an offer they can't refuse. That's why the biggest improvement to 401(k)s is auto-enrollment.
  8. Professionals

    Retirement Planning Essentials for Your Clients

    You may have heard these retirement planning tips before, but has your client actually put them into action yet?
  9. Professionals

    Which Robo-Advisor is Right for You?

    Which robo-advisor is right for you? There are many factors to consider, including breadth of services, ease of use and cost.
  10. Investing Basics

    This Investment Strategy Could Be Your key To Success

    Goal-based investing seems like an obvious tactic. But many investors have only a vague idea what their goals are, much less how to achieve them.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center