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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16559
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I have an opportunity to purchase a mobile home, but need to

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I have an opportunity to purchase a mobile home, but need to take a home loan on my deferred comp account (10k) and another 8k from a traditional IRA (all for down payment). I am 1st time homeowner and this will be my principal residence. I want to know what the tax liabilities are particularly on the IRA funds. I am 55 years old.

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

Are you going to take a loan out of your deferred comp account, and then a withdrawal from your IRA?

MyVirtualCPA :

You would not be charged the 10% early withdrawal penalty, but you would be charged income tax at your ordinary tax rate.

MyVirtualCPA :

How much tax you are charged depends on your other income.

MyVirtualCPA :

I need further clarification ... are you taking a loan out on your deferred comp account or are you withdrawing funds from your deferred comp account?

Customer:

I am talking about a loan on my deferred comp for 10k and a withdraw from my IRA with the specific purpose of putting a downpayment on a primary residence. my income presently is about 70k (30k is retirement pension)

MyVirtualCPA :

the loan is not taxed

MyVirtualCPA :

Your $8,000 withdrawal would be taxed at your ordinary tax rate

Customer:

my deferred comp plan allows for 10 k to be loaned specifically for downpayment on home with a 30 year payback time

MyVirtualCPA :

Are you married or single and do you have any children?

Customer:

single no dependents/adult son

MyVirtualCPA :

ok

MyVirtualCPA :

With your income you are in the 25% tax bracket

MyVirtualCPA :

the tax on your IRA withdrawal would be $2,000 which is 25% of $8,000

Customer:

it says 'awaiting customer action' but now sure what else you need?

MyVirtualCPA :

I said that the additional tax on the IRA withdrawal is $2,000

Customer:

got is 25% tax bracket. This screen is very hard to follow the answer. is the interest on the loan and taxes deductible?

MyVirtualCPA :

If you itemize your mortgage interest is tax deductible

MyVirtualCPA :

but you would need more than $12,200 to make it worthwhile to itemize

Customer:

are you done?

MyVirtualCPA :

Have I answered all your questions?

MyVirtualCPA :

If you are satisfied with our chat, you can rate me as "excellent" so that I can get credit for helping you

Megan C and 3 other Tax Specialists are ready to help you
Kathleen,

If I have not answered all your questions, please reply here and continue our correspondence. Otherwise, please rate my response "excellent" so that I may receive credit for assisting you today.
Customer: replied 3 years ago.

I rated excellent

Thank you so much for the positive rating. It was a pleasure working with you tonight and if you ever need another question answered please come back and ask for me. I hope you have a great night and thanks again.