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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I am 79 years old, I want to liquadate or transfer my IRA to

Resolved Question:

I am 79 years old, I want to liquadate or transfer my IRA to my grandson's TAP 529 college savings program. What are the tax implications here.
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.
Hello jlk,

Anytime that you take a distribution from your IRA account, you become subject to income tax on that money in the year that it is withdrawn. The amount of tax that you owe will depend on how much you withdraw in one year, and how much other income you may have for the year.

If you are currently receiving social security benefits, then depending on the amount you withdraw from your IRA, part of your SS benefits may also be subject to tax, as you are limited on how much other income you may have before part of those SS benefits are taxable.

There are no tax exclusions or reductions based on your use of the funds for a college savings program, or for any other reason.

If the amount of your IRA account is not very large, then the tax may not be a big issue. However, if you have a substantial balance in your IRA account, then the more you withdraw in any one year, the higher tax bracket you will end up being in. For that reason, it would be better to take your distributions over a period of years rather than all at one time if you can possibly do so.

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Thank you.

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