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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11140
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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If We take money out of our IRA, we will have to pay taxes,

Customer Question

If We take money out of our IRA, we will have to pay taxes, but wish to do it to purchase a piece of property out of the state of California. ? Will this purchase offset or give us writeoffs so we don't get stuck with claiming the withdrawal as income?
Is is better to move our IRA to the state of Texas or Florida first, can this be done with a domicile established in one of those states?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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So sorry, but ANY distribution form an IRA is taxable (in terms of Federal income tax) - and there's the additional 10% penalty if you are under age 59 and 1/2.

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Being a resident of FL or NV would exempt you from the STATE income tax that could be charged on an IRA distribution.

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If the property you want to purchase is not for PERSONAL use, (but rather an investment) you might want to consider using one of the custodians that will allow for the purchase of real-estate BY the IRA.

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See this (I have no association): https://www.trustetc.com/real-estate-ira/faqs

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On the question of offsetting deductions:

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If you purchase the property as a rental property, then there ARE deductions for mortgage interest, property taxes, (those would be available for a residence puechase as well), advertising, repair and maintenance, depreciation, and other rental deductions.

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let me know what questions you may have from here...

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Lane

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Customer: replied 1 year ago.
We are 69. Time is of essence . You mention NV and/or FL, what about Texas. We have an address there. The property however is in Arkansas and we are presently on the road, the IRA is in CA.Time is of essence as this is 75 acres for about 50,000 below market value. We were going to rent it out or perhaps use it for an animal reserve. So, with this said, would I be able to move the IRA to another State and then take the funds, or is it possible to roll it over. Don't we have 90 days to put it back without incurring the tax. ?
Expert:  Lane replied 1 year ago.

Sorry, NV also has no income tax ... but yes, Texas is the same.

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The taxation is based on where you are residents (not where the IRA itself is) ... most brokerage and Banks that serve as custodians of IRAs hav multiple , even international, locations.

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Taxation is always based on your state of residency

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And on the rollover piece, the rule is 60 days ... and you can only do this once per year,

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SO yes, you could pull, use,and then get tht same amount back in and it would be as if you had not taken the distribution.

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Where te rental property is located, is irrelevant to the IRA part of this ... BUT ... and rental or other investment income FROM the property will be taxable in the state it resides ... although you will still get those rental deductions (at both state and federal level)

Expert:  Lane replied 1 year ago.

Hi,

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I'm just checking back in to see how things are going.

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Did my answer help?

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Let me know…

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Lane

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