Have a Tax Question? Ask a Tax Expert
If you take money out of your IRA before you are 59 1/2 you will pay tax on the amount you take out and you will be penalized on that amount. The penalty is 10% of the amount you take out.
The 10% is shown on your tax return when you file. It is just a straight 10% of the total distribution shown on your 1099R (the document you are sent if you take out).
The total distribution is added to your other income for the year and taxed as regular income.
You pay regular tax on the total and 10% penalty on the total.
If you take out $3700 you will have a penalty of $370 AND the $3700 will be added to your income.
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I do not know why he said 42% unless he was adding all your taxes (fed, state, penalty).
I can just tell you that the penalty is applied to the total of the distribution.
An exception t the penalty can apply. A first time home purchase is an exception up to a limit of $10,000.
Most likely the withdraw would not push you up.
Now I am going to ask that you click on a favorable rating.