Roth IRA distributions are either qualified or nonqualified. For a qualified Roth IRA distribution, all distributions are tax free which means that you have had the Roth IRA for both 5 years and are age 59 1/2 or older at the time of the distribution. One exception is for Roth IRA contributions, those can always be distributed tax and penalty free under the Roth IRA distribution order rules even if you have not had the Roth IRA for 5 years and are under age 59 1/2.
For a nonqualified Roth IRA distribution, some of the earnings are subject to income tax and a 10 percent early distribution penalty if your are under age 59 1/2.
Funds that were converted from the voluntary after-tax solo 401k to the Roth IRA are referred to as “nontaxable” when applying the Roth IRA distribution order rules. Nontaxable conversions/rollover assets are those that represented after-tax (nondeductible voluntary after-tax solo 401k funds (excluding designated Roth 401k funds) when moved to the Roth IRA. If the voluntary after-tax solo 401k funds that were converted to a Roth IRA are distributed before meeting the Roth IRA 5-year rule and you are under age 59 1/2, then the distribution is not subject to income taxes because they after-tax funds in the plan; however, the 10% early distribution penalty tax will apply.
