In most cases, if you liquidate your IRA before you reach retirement age, the IRS considers it an unqualified distribution.
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Unlike other investments, the Internal Revenue Service’s rules about taxing distributions – its term for any withdrawal from your IRA – are somewhat complicated, and the tax you should expect to pay if you liquidate your IRA depends upon the type of IRA, your age at the time of liquidation and other situations in your life.
The IRS considers any distribution from your Roth or traditional IRA a qualified distribution if you make it after you turn 59 1/2 or meet exemptions to its early distribution rules.
All distributions from a traditional IRA will be taxed as regular income unless some of your contribution was after-tax.
In addition, if you liquidate before reaching age 59 1/2, you will have to pay an additional 10 percent penalty with certain exceptions.