What distributions from a traditional IRA are fully taxable?

To determine which distributions from a traditional IRA are fully taxable, it's essential to understand how traditional IRAs are taxed upon distribution. When an individual contributes to a traditional IRA, they may make either deductible or nondeductible contributions.

When it comes to deductible contributions, these are made with pre-tax dollars, meaning that taxes were not paid on that money when it was contributed. Therefore, when distributions are taken from the traditional IRA, these deductible contributions (and their associated investment earnings) are fully taxable as ordinary income at the time of withdrawal. This is because the contributions and earnings have not yet been taxed.

In contrast, nondeductible contributions represent funds that have already been taxed before being contributed to the IRA. When distributions occur that include nondeductible contributions, only the earnings on those contributions will be taxable, while the portion of the distribution attributable to nondeductible contributions will not be taxed again.

Distributions made after retirement or at any time will still adhere to these tax principles—the tax treatment hinges on whether the contributions were deductible or nondeductible.

Thus, the option stating that any deductible contributions are fully taxable is correct, as all distributions that include these contributions must be recognized as taxable income.