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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12653
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

Customer Question

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.
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.

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, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12653
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and 5 other Tax Specialists are ready to help you
Expert:  Megan C replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Megan C replied 1 year ago.
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 1 year ago.

I rated excellent

Expert:  Megan C replied 1 year ago.
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.

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