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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 577
Experience:  10 years experience
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We screwed up. We used our HELOC to purchase an early

Customer Question

We screwed up. We used our HELOC to purchase an early retirement for my husband. We should have used his deferred compensation (and we could have just rolled it over). Now it looks like we are divorcing, and we need to get at that deferred comp money - and we're going to take a big tax hit. I'm wondering if there is anyway to undo this mess.
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

Money in your retirement accounts were never tax before so you cannot take it out tax free. In addition, if you are not 59 1/2 there will be 10% penalty. You may be able to avoid the penalty, depending what you use it for. Unfortunately, paying off your HELOC will not qualify for the exemption.

You may be able to reduce the liability if you split the distribution between two years. If you take half now and half next year you may be able to stay in lower tax bracket.

Expert:  emc011075 replied 1 year ago.

I see you read my respond. Any questions? What do you plan to do with the cash from the retirement account? If you need to split the money in the account you do not necessary need to take the distributions. There are some other options. However, if you want to take a distribution to pay off other debts there's really no other way.