When you withdraw money from a traditional IRA, it is taxed, but only if it was deductible. The general rule is, whatever was deductible from taxable income at contribution time will be taxed at withdrawal time, and whatever was not deductible at contribution time will not be taxed at withdrawal. If your IRA consists of some contributions that were deductible and some that were not, your withdrawals must be separated accordingly so the proper portions can be taxed. The IRS provides formulas for this separation.