Is Mike required to report interest income earned in a traditional IRA on his tax return?

In a traditional IRA (Individual Retirement Account), interest income, as well as any other types of investment income, is not required to be reported on Mike's tax return while it remains in the account. This is because traditional IRAs are tax-deferred accounts. The investment earnings, including interest, dividends, and capital gains, grow tax-deferred until they are withdrawn. This means that Mike only needs to report and pay taxes on this income when he takes distributions from the IRA, typically during retirement or if he takes an early withdrawal.

Tax deferral allows individuals to potentially grow their savings without the immediate tax burden, encouraging long-term retirement savings. Hence, unless Mike makes withdrawals from the account, he will not include the interest income earned inside the traditional IRA on his tax return. This mechanism is one of the key benefits of using a traditional IRA for retirement savings.

The options that suggest reporting the income at times other than upon withdrawal do not align with the rules governing traditional IRAs.