When are the contributory funds for a Roth IRA taxed as income?

For a Roth IRA, contributions are made with after-tax dollars. This means that the money you contribute to a Roth IRA is already taxed before it goes into the account. Therefore, when the question addresses when the contributory funds are taxed as income, the correct understanding is that they are taxed before the contributions are made.

This is a key feature of Roth IRAs, distinguishing them from traditional IRAs where contributions may be tax-deductible and taxes are due when distributions are taken in retirement. The tax treatment for Roth IRAs allows for tax-free withdrawals of both contributions and earnings in retirement, provided certain conditions are met. The premise of the Roth IRA is that you pay taxes up front, and then the funds grow tax-free and can be withdrawn without tax consequences later on.