Archive for January, 2007
Withdraw Ira For Home Purchase
January 28th, 2007
Question: Is down-payment for a second home tax deductible?
I am thinking about take my IRA account money out for the down-payment towards the purchase of my second home. I know there will be a penalty for withdraw from IRA. My question is will it be tax deductible?
Answer: A down payment for a home, even a first one, isn’t deductible except for the part that’s for mortgage interest and real estate taxes. Those items are deductible for a second home too, if you itemize.
The penalty for early Ira Withdrawal is only waived for a first time buyer purchasing a first home, not a second home. So you’d owe a 10% penalty, which is not deductible.
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Ira Withdrawal College
January 27th, 2007
Question: On an Early Withdrawal from an IRA, does the IRS assess the 10 pct fine on the gross distribution or on net?
- that is, on the net after the taxes have been paid?
real life example that is promting the question is this:
We need to make a withdrawal on our IRA to pay for $11,500 of college costs, which happen to be allowable use of that money.
The question is: how much do I reques tto be taken out – what should my gross distribution be while still having enoug to pay for taxes ? We are in the 15 pct tax bracket.
Answer: It partly depends on what type of IRA you opened. There is the traditional or the Roth. If you have a Roth then you don’t have to pay further taxes. I’m assuming you have a traditional though. In that case you would be taxed at your income bracket. Be careful though because the extra withdrawal may be enough to push you into a higher tax bracket. At 15% though you should pull out $13,530.
The calculation works like this:
Gross withdrawal = $11,500 / (1 – tax bracket)
@ 15%
Gross withdrawal = $11,500 / (1 – .15)
Gross withdrawal = $13,530
If your tax bracket will increase use the formula above that.
You might want to call someone with the IRS as well to confirm that. I’m not a tax accountant, just a guy. Visit IRS.gov and find a contact.
Purdue: 2007 IRA – College Rowing Nationals