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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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I need to withdraw $60,000 from my IRA down payment on a new

Customer Question

I need to withdraw $60,000 from my IRA for a down payment on a new home. What is the best way to do this to minimize taxes
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.

What type of IRA? ROTH or Traditional? In brief, other than meeting an exception or it being a qualified distribution from a ROTH IRA, there is no way to minimize the taxes.

In general, if this is a traditional IRA, the $60,000 will be taxable as ordinary income. In addition, if you are not age 59.5 years or older, there will be a 10% early withdrawal fee unless you meet an exception. SEE BELOW:

Withdrawal rules for Traditional IRAs

With Traditional IRAs, you defer taxes until you begin to withdraw money. The rules vary depending on your age.

Withdrawals prior to age 59½

Distributions from Traditional IRAs prior to age 59½ are subject to a 10% penalty, in addition to applicable federal and state taxes. Under the following circumstances, you may be able to avoid the penalty on early withdrawals:

  • First-time home purchase
  • Qualified education expenses
  • Death or disability
  • Unreimbursed medical expenses
  • Health insurance, if you're unemployed

On the other hand, if it is a ROTH IRA and the distribution is a qualified distribution, the distribution will not be taxed, nor will there be an early withdrawal penalty if you are not age 59.5 years or older. SEE BELOW:

Withdrawal rules for Roth IRAs

A qualified distribution from a Roth IRA is tax-free and penalty-free, provided that the five-year aging requirement has been satisfied and one of the following conditions is met:

  • Over age 59½
  • Death or disability
  • Qualified first-time home purchase

A non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies.

REFERENCE SOURCE:

https://www.fidelity.com/retirement-planning/learn-about-iras/ira-withdrawal

Let me know if I can be of further assistance to you regarding this matter.