Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Can I borrow money from my IRA account?

Can I borrow money from my IRA account?
Ask Your Own Tax Question
Answered in 11 minutes by:
11/4/2012
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,131
Experience: Taxes, Immigration, Labor Relations
Verified

LEV :

Hi and welcome to Just Answer!


Please see IRS publication 590 - http://www.irs.gov/pub/irs-pdf/p590.pdf - Prohibited Transactions on page 44.


The following are examples of prohibited transactions with a traditional IRA.


--Borrowing money from it.
See also - page 45:
Taxes on prohibited transactions. If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected.

LEV :

So borrowing money from IRA account is classified as a prohibited transaction and is subject of additional penalty.
What you may do - transfer distributed funds into a different IRS within 60 days - in this case it will be considered rollover and will not be taxable distribution.

Ask Your Own Tax Question
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,847
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

You say "I plan to move part of my 401k to IRA and want to know, if there is option to borrow money from IRA, which exists in 401k or similar."

 

 

 

You CAN borrow money from your 401(k), if that particular 401(k) plan allows for a loan.

 

 

 

The post above, however, is correct in saying that actual loan (FROM AN IRA) is a prohibited transaction, although I doubt that any IRA custodian would ever do a loan.

 

 

 

They would just characterize any money withdrawn as a distribution.

 

 

However, if you DID distribute the money and were able to get that same amount of money back into an IRA within 60 days (and that might be hard to do because the IRA custodian will probably - depending on your state - insist on a minimum amount of withholding, which you would have to come up with ) then it WOULD qualify as a rollover.

 

 

You can do one rollover per year.

 

 

BUT, if you have not moved the money from the 401(k) as you say, you should check on borrowing the money from there.

 

 

You will have to pay that money back within a fixed amount of time (usually 5 years, but they may allow for longer, for a home purchase) or THAT loan - whatever amount is not paid back - will be characterized as a distribution ... (and of course be taxed ... and cause a tax penalty as well, if you are under age 59 and 1/2).

 

 

 

 

 

 

 

 

 

 

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,847
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,847
12,847 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
What are tax implications when docating small IRS to state
What are tax implications when docating small IRS to state university … read more
Lane
Lane
JD, CFP, MBA, CRPS
12,847 satisfied customers
Traditional IRA contribution - *Married taxpayers file MFJ
Traditional IRA contribution -*Married taxpayers file MFJ *One spouse covered by retirement plan, one is not *AGI will be over $ 200K for 2017 *Taxpayer that is not covered by retirement plan, contrib… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
Recnetl;y i recieved and withholding tax bill from the state
recnetl;y i recieved and withholding tax bill from the state of ri divison of taxation fromm 1999, is there a stue of limitations on this … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I'm 75 and subject to annual RMD's from my traditional IRA.
I'm 75 and subject to annual RMD's from my traditional IRA. In looking a way to shelter the RMD amount if I were to reinvest it, I stumbled on the virtually unlimited IRA to Roth Conversion. My questi… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
I need to prepare a non- withholding or reduce withholding
I need to prepare a non- withholding or reduce withholding certificate so my client can sign before transferring the tax to the IRS under FIRPA.My client and his brother owns an apartment for 500k 50%… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
I currently have a SEP IRA & Traditional IRA and I'm
Hi,I currently have a SEP IRA & Traditional IRA and I'm thinking about either adding a Solo 401K or converting both of my current IRA's into a Solo 401K because I like the idea of being able to self d… read more
Lev
Lev
Tax Advisor
30,131 satisfied customers
If I am about to turn 70 and I have a Traditional IRA and a
Hi Pearl! If I am about to turn 70 and I have a Traditional IRA and a Roth IRA, can I take my RMD's from my Roth as opposed to my Traditional? I know that the Roth doesn't have required RMD's but I wa… read more
abci168
abci168
Principal
27 satisfied customers
Second opinion] Yes, I filled out the IRS withholding
Second opinion] Yes, I filled out the IRS withholding calculator and it suggested I claim 8 allowances. That seems excessive. I redid it today and IRS says to claim 6, and a similar calculator from Tu… read more
Lev
Lev
Tax Advisor
30,131 satisfied customers
I filled out the IRS withholding calculator and it suggested
I filled out the IRS withholding calculator and it suggested I claim 8 allowances. I am single, live independently, and have no dependents. I worked at a different, lower paying job from January to mi… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
I'm 71 and I want to cash in my traditional IRA of $20,000.
I'm 71 and I want to cash in my traditional IRA of $20,000. It has been sitting there for 20 years and only made $167. How much will the IRS charge for the transaction? … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
My wife has a traditional IRA, Roth IRA, 401K and a pension.
My wife has a traditional IRA, Roth IRA, 401K and a pension. I have a Rollover IRA, Roth IRA and two 401ks. We wish to divide all retirement funds 50/50 but I do not see a way to communicate that. Ide… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
I am thinking of converting my traditional IRA to a Roth IRA
I am thinking of converting my traditional IRA to a Roth IRA and I am trying to figure out what tax rate is used in the conversion. My ordinary inocme, excluding cap gains and dividends, with be negat… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I have a traditional IRA account that has accumulated funds
I have a traditional IRA account that has accumulated funds rolled over from past places of employment. I want to use those funds to purchase real estate for investments. I would like to set up a Solo… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
Would I be able to borrow from my traditional IRA a/c to
Would I be able to borrow from my traditional IRA a/c to purchase a house and repay the amount plus interest within 60 days? Or would the amount withdrawn be subject to Federal Income tax liability?… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,847 satisfied customers
I need to close my traditional IRA, at what percent to I do
I need to close my traditional IRA, at what percent to I do have the federal and state (GA) tax withheld? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
IRS said the Roth IRA reported distribution was not held for
IRS said the Roth IRA reported distribution was not held for at least 5 years. It was. I was told I needed to send in a 8606 with my 2014 tax return. How do I go about doing that so I don't own the $1… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,847 satisfied customers
We opened a traditional IRA for my wifebefore tax filing
We opened a traditional IRA for my wifebefore tax filing deadline this year and contributed the maximum amount, lowering our taxable income. We are both 68 years old...I'm still working and drawing So… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,847 satisfied customers
I am ready to distribute the funds to the beneficiaries as
I am ready to distribute the funds to the beneficiaries as the Executor of my mom's Estate. The Estate has no debts and no earned income (No Interest, No Investments etc..) only the following funds it… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,847 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x