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Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  3+ decades of varied tax industry exp. Tax Biz owner
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If I take a partial withdrawl from my traditional IRA to invest

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If I take a partial withdrawl from my traditional IRA to invest in gold, will I have to pay taxes on the partial withdrawl?
Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

In brief, yes, if you take a distribution from a traditional IRA, and you are under the age of 59-1/2 years of age, unless you meet one of the exceptions...(which the purchase of gold) is not one of them, the withdrawal amount will be taxed as ordinary income, and a 10% early withdrawal penalty will apply. SEE EXCEPTIONS BELOW:


The federal government charges a 10% penalty for early withdrawals. A state tax penalty may also apply to early withdrawals. You may be able to avoid a penalty on early withdrawals if your reason for withdrawing funds is one of the following:

First time home purchase. You may be able to withdraw funds for certain home purchases, subject to a lifetime limit of $10,000 in pre-tax dollars. You must use the money for this purpose within 120 days of withdrawal.

Qualified education. There’s no penalty on withdrawals if you use your funds toward certain educational expenses for you and your immediate family.

Disability. If you’re disabled, you can withdraw IRA funds without penalty.

Unreimbursed medical expenses. Withdrawals are allowed without penalty if you use the funds to pay unreimbursed medical expenses in excess of 7.5% of your adjusted gross income (AGI).

Health insurance. If you’re unemployed for at least 12 weeks, you may withdraw funds to pay health insurance premiums for yourself, your spouse, or your dependents.

Substantially equal periodic payments. You can also avoid an early withdrawal penalty if you elect to receive your funds on a regular distribution schedule, which the IRS calls “substantially equal periodic payments.”
Customer: replied 5 years ago.
I am on disability so I dont think I will have to pay the penelty. How can I find out what the percent I will have to pay in tax?
Hello again,

You are correct, due to your disability, the 10% penalty will not apply to you. The withdrawal amount will be taxed as ordinary income. So it depends on what tax bracket you fall under, as to what percentage the withdrawal amount will be taxed at. Tax brackets are determined by filing status and the amount of all income. In order to better assist you, may I ask what your total income, including the withdrawal amount will be for 2011, and what your filing status is?
Customer: replied 5 years ago.
The total would be 73,172.00 that is 23,172.00 disability and 50,000.00 from the IRA. I am married but file seperate with no dependents.
If your employer paid the premiums for the disability policy, the disability income is taxable income. Did your employer pay the premiums or are you receiving payments under a private disability policy?

You will fall under the 25% tax bracket for federal. This is regardless to whether the disability is taxable or not. If your employer did not pay the premiums and you are receiving payments from a private policy, then your taxable income is the $50,000. If your employer did pay the premiums, your taxable income is $73,172. For the state of Kentucky, you fall under the 6% tax bracket.
Customer: replied 5 years ago.
I am receiving SSI disability. I have not been employeed since 2005. So will it be 25% on the 50,000.?
Yes, 25% on the $50,000. The income amounts for the 25% federal tax bracket is as follows:


For state of KY:

$8,000+ - 6% tax bracket.
Customer: replied 5 years ago.
Thanks you have been a great help. I will accept answer. Thanks again
You are very welcome and I thank you in advance.
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