What is the tax treatment of earnings from an IRA?

Earnings generated within an Individual Retirement Account (IRA) are indeed subject to tax-deferred treatment. This means that taxes on earnings such as interest, dividends, and capital gains are not paid until funds are withdrawn from the account. This deferral allows the investments to grow without the immediate burden of taxes, potentially leading to a larger accumulation over time. Upon withdrawal, the distributions are typically taxed as ordinary income, provided that the account holder is taking distributions from a traditional IRA. This tax treatment encourages individuals to save for retirement by allowing their investments to grow without tax erosion until they are ready to withdraw the funds.