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sudsy9977

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if i make an early withdrawl on my roth ira i get a ten percent penalty on my gains and i have to pay tax on that....how can i figure out how much tax i will owe?.....i have no friggin idea....ryan
 

sudsy9977

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Keep in mind that for a Roth IRA, there are no taxes owed on an early withdrawal, as long as the account has been established for at least 5 years.


I also found this?.....do this only apply if i am over 59?....which aim not by the way.....Ryan
 

rahimlee54

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I know you can draw the principal from your Roth penalty free. I'd call the company managing and ask them, they should be experts.
 

sudsy9977

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I called and he said it is penalty free but he cant advise me on taxes at all....that is the part i was wondering about....Ryan
 

Pensacola Tiger

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You can get a good idea by looking at your last year's taxes, and figuring what the increase would be for the amount you will withdraw using the tax tables from your return. Say you had a taxable income of $35,000 after deductions and exemptions, and you are filing jointly. According to the tax table, you paid $4,404 in tax. If you plan to take $20,000 from your IRA, just look up $55,000 and you'll see that the tax has increased to $7,404, so you'll owe $3000 in taxes on your withdrawral of $20,000.

Or, you can use this table from the IRS to find your marginal tax bracket and the rate associated with it.

 

bprescot

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Wait a second, though. You've already paid tax on your Roth principal. The entire point of the Roth is that it's an after-tax contribution but when you draw down against it it's tax free. It's like the inverse of a 401K or 403b.

Does anyone know if there are in fact any tax implications for drawing early against a Roth?
 

Pensacola Tiger

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Wait a second, though. You've already paid tax on your Roth principal. The entire point of the Roth is that it's an after-tax contribution but when you draw down against it it's tax free. It's like the inverse of a 401K or 403b.

Does anyone know if there are in fact any tax implications for drawing early against a Roth?
My bad. I was thinking about my own, non-Roth, IRA.
 

Eamon Burke

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From my finance course(which I am taking currently, so it's up to date):
With a Roth IRA, contributions are not tax deductible, but earnings accumulate tax free. ... Five years after you establish your Roth IRA, you can take tax-free, penalty-free distributions if you are at least 59½ or will use the fund for first-time home buyer expenses.

Your Roth IRA is exclusively for you. Your interest in the account is nonforfeitable. You can't borrow from your Roth IRA. If you use your Roth IRA as collateral for a loan, the part you pledge as collateral will be taxed as a withdrawal.

...

If you are saving for a first-time home purchase or retirement at age 59½, and these events are at least five years away, the Roth IRA allows for penalty-free withdrawals as well as tax-free distributions.
 

sudsy9977

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I am not 59 or using it for medical bills or a house or the other things they list so i assume i have to pay he tax on ONLY my gains?....so if i am in whatever tax bracket....lets say 25 percent.....does that mean literally i pay 25 percent tax on it?.....i know thats probably a stupid question but......

My other thought is.....lets say I didn't tpake any money out and aim supposed to get back a thousand dollars on my taxes......lets say with my Ira i wind up having to pay a thousand in tax.....does that mean i am at 0 and don't have to pay anything ?.....Ryan
 

WildBoar

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I am not 59 or using it for medical bills or a house or the other things they list so i assume i have to pay he tax on ONLY my gains?....so if i am in whatever tax bracket....lets say 25 percent.....does that mean literally i pay 25 percent tax on it?.....i know thats probably a stupid question but......
Yes, that is correct. Plus state income tax, etc.


My other thought is.....lets say I didn't tpake any money out and aim supposed to get back a thousand dollars on my taxes......lets say with my Ira i wind up having to pay a thousand in tax.....does that mean i am at 0 and don't have to pay anything ?.....Ryan
Correct. If you overpaid $1k, then owed $1k for the withdrawl, it would balance out to 0.
 
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